San Francisco, CA · Member since 2017 · 7 posts · 1 vote
Does anyone know if there are any special tax benefits in this situation:
Buy a 2/3 bedroom house and have the child live in one of the bedrooms and rent out the others.
Would I file taxes normally i.e. as if I am only getting rent from the other 1/2 bedrooms and no other tax benefits when I sell? Sorry if I missed a previous thread on this, but couldn't find anything.
Rental Property Investor · Cheney, WA · Member since 2018 · 2 posts · 2 votes
8y
Will the child be paying you rent equal to the other room rates? That is the best way to structure it, you would treat it the same way as if renting to strangers because it is an arm's length transaction. You take all the expenses and depreciate normally.
If not, you would need to allocate the portion of the expenses attributable to your child's use. For example if it is a three bedroom and they all have reasonably equal rooms and use of the house, you would take 2/3rds of the expenses (mortgage interest, depreciation, repairs, utilities you pay etc) as reductions to rental income on your tax return.
In any case, if the property has gone up in value over what you paid, when you sell you would get hit with the whole gain (plus depreciation recapture) because it is not your personal residence. That's true even if it sits empty.