How Do I Structure This Deduction?
I've read previous posts on sub2 tax deduction regarding issues on primary residence. Here's my question for this think tank
parents want to deed (gift) a house to their children (5 of them). house (CA) currently has apprx. 500k in equity with about 220k in remaining loan balance. children want to take over loan payments, taxes, etc. to this house. children plan to use this house as primary residence.
1) can the children take the mortgage interest deduction to the house even if the loan is not in their name?(if they can show proof of payments) If yes, since they're 5 of them, will this be set up as a trust or can 5 of them (individually)send their portion of mortgage payments to the lender and/or loan servicing co?
2) will this trigger a DOS on the loan and if yes, what can be done? will a loan servicing company solve this issue
3) since this property will be deeded and no change in the name of the loan (remains with the parents), will the children (in the future), still qualify as a 1st time homebuyer even if they're making the mortgage payments.
4) does the deed need to be recorded ASAP to be legal??
thank you all.
Quote:1) can the children take the mortgage interest deduction to the house even if the loan is not in their name?(if they can show proof of payments) If yes, since they're 5 of them, will this be set up as a trust or can 5 of them (individually)send their portion of mortgage payments to the lender and/or loan servicing co?bossanova,
As far as the tax deduction for property taxes and mortgage interest is concerned, all titled owners are eligible to take a deduction to the extent of their contribution.
It the property is held in a trust (irrevocable) for the beneficial interest of the children, then the trust should make the monthly payments and give each beneficiary a Schedule K-1 for their proportionate shares. Funding the trust in the first place, so the trust has the money to make the payments is an issue to be addressed by the parties involved with the attorney who is drafting the trust document.
The rest of your questions should be addressed in the legal forum