Monday, March 5, 2007
Cheryl Ramos of Ramos & Ramos CPA presented a very interesting tax plan for those with elderly parents. If the parent owns their home and they are in a low tax bracket - probably retired - they are not benefiting much from deductions from their home. Low property tax bill, low mortgage deductions or none at all and large equity tied up in the house are common situations. Her proposal is for the adult children to buy the parent's house and rent the house to the parents. Why you ask? Benefits are many. The kids get many tax benefits as a rental property. The parents free up a large amount of equity (much of which may be capital gains excluded), they don't have to move, they can gift some of the funds to their kids, etc. The children can deduct travel expenses to "manage" their investment property. This may be a win-win for all involved.