Author Topic: Reduce rent by effective tax rate if gifted?  (Read 513 times)


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Reduce rent by effective tax rate if gifted?
« on: July 03, 2019, 12:39:06 PM »
Folks, my mother in laws husband passed away and my MIL has requested that I purchase a property for her to live in (with fair rent)

Item 1
May I legally reduce the rent rate (in Indiana) by the rate I would be taxed at and have her live as family rather than tennent - having her gift the money over.

I understand I'll lose the ability to use that units 2 year history cash flow as an income source to qualify for future investment property loans.

Item 2
If I buy a duplex to live in the adjoined unit, I can qualify for an FHA today without having to sell my current home (skipping the whole contingency shuffle).  I would likely then put my current house on the market (as it's below 1% rule) rather than rent for just above break even.  That home is at 80% ltv, so after selling fees would NOT have enough to refi pricier duplex down to 80% and would instead toss money into VTI.

Technically I could do 20% down but I'd need to liquidate most of my traditional IRA and take all those nasty tax hits.  Not worth it.

Item 3
If MIL wants to remodel her unit, do I need to mark improvements she makes on her dime as income?

Thanks crew!


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Re: Reduce rent by effective tax rate if gifted?
« Reply #1 on: July 03, 2019, 02:37:23 PM »
Why can't she just purchase her own property or rent one on her own?


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Re: Reduce rent by effective tax rate if gifted?
« Reply #2 on: July 03, 2019, 02:58:08 PM »
She no longer wants to own and doesn't budget for maintenance.

She can rent on her own, has had some bad landlords in prior years, and wants me to recieve the rental fees rather than a stranger.  She also views this as a way to transfer wealth while she's living. Currently I do most landlord tasks at her home anyways and have for a decade.   

She did NOT ask about gifting, but rather at fair market rates.
« Last Edit: July 03, 2019, 02:59:42 PM by Kem »