Need Advice: 2nd Home And Mother
I recently purchased a new home with the intention of selling my old home, however, my mother is now retired and I would like her to live in my old home. The old home is worth 200K and my mom can only put about 40K towards it. The oustanding balance is around 160K. What is the best way to handle this to minimize taxes? If I accepted any of the 40K without putting her on the title, would that be considered "rent" since it is my mother? Should I put her on the title and have a survivorship clause?
<gphmh>
A good answer here, I think, would require more information. Mom can live in the house without owning it. You could rent it to her for a monthly amount equal to your mortgage payment. You could take the $40k as advance payment on rent or you could let it sit in Mom's account and be transferred direct to you mortgage payment every month.
If you took the $40,000 as advance rent then it would be ordinary income. If you sold the house to Mom on Land Contract and took the $40 as a downpayment then it would be taxed at capital gains rates.
Or mom could give you some part (I forget the exact amount of the limit on this provision) of the $40,00 as a gift, which is tax free and you could let her live in the house for free as a gift because you are such a nice son/daughter.
Do you qualify for CG exemption? Did you live in your old house 2 of the last 5 years. If so, I am pretty sure you do not owe any CG taxes.
MY .02
Matthew Marks