Hi,
Those people on the forum who follow my posts (that would be no one), might remember that we live with our DD/SIL. It is highly likely we will be moving in the next few months. Right now we are renting. However, we are investigating DD/SIL purchasing a house and renting part of the house to us. BTW, this arrangement has nothing to do with finances as both couples could easily maintain an independent living arrangement. (We have been making this work for 4 years now, so not concerned with living arrangement advice/suggestions for this post).
My research so far suggests rent must be at a fair market value. And, some deductions can be made by measuring square footage and or percent of the house that the rented portion represents.
However, in our case, beyond our private bedrooms, we share the house. This includes sharing meals, groceries, cable, internet, utilities, phone, etc. We maintain a spread sheet and divide shared expenses 50/50.
I am sure I have left things out but given this information and other questions you may have, what do you think would be the best arrangement for DD/SIL to get the best tax benefit from this approach? What would be the hurdles for compliance? Given we would have access to more than just a bedroom, would they be able to claim a higher percent of household cost for utilities/internet/etc for example, etc.
I am also working with the NYT buy vs rent calculator. Renting part of a property is not included in the calculator. I am assuming renting part of the house offers advantages to buying a home without income so that the NYT results represent worse case. If I am missing something with this assumption, please let me know.
What happens differently on the sale of a partially rented house from a tax perspective? How should this be considered in our analysis? I have not located information on this yet.
Another approach that might be better is to simply live with DD/SIL without a rental agreement and continue with our current arrangement. DW and I would simply pay an agreed upon allowance which would help them with their expenses. But, they would not claim any of the rental benefits. And, they would not claim income. I guess it would be a gift or simply a family living together. This does not feel like the best financial approach but perhaps someone with more experience could comment that in terms of a way to make things easier, it is a better, if even slightly more costly than the 'tax' benefit approach.
Just a touch more background. Renting for DW is preferred. This idea to have DD/SIL buy and we rent, came as a way to help our children build some wealth. The NYT calculator is suggesting that buying or renting is a fairly close call, if we must move in about a 3 year time frame. Beyond that, buying makes sense. But, when we consider the 'gift/rental' money we would provide, there would be no additional cost for us and perhaps a benefit for them. Helping them along in an arrangement like this to their ER would make us happy.
Your advice and/or guidance to publications (I have done some research) is appreciated as always.
Those people on the forum who follow my posts (that would be no one), might remember that we live with our DD/SIL. It is highly likely we will be moving in the next few months. Right now we are renting. However, we are investigating DD/SIL purchasing a house and renting part of the house to us. BTW, this arrangement has nothing to do with finances as both couples could easily maintain an independent living arrangement. (We have been making this work for 4 years now, so not concerned with living arrangement advice/suggestions for this post).
My research so far suggests rent must be at a fair market value. And, some deductions can be made by measuring square footage and or percent of the house that the rented portion represents.
However, in our case, beyond our private bedrooms, we share the house. This includes sharing meals, groceries, cable, internet, utilities, phone, etc. We maintain a spread sheet and divide shared expenses 50/50.
I am sure I have left things out but given this information and other questions you may have, what do you think would be the best arrangement for DD/SIL to get the best tax benefit from this approach? What would be the hurdles for compliance? Given we would have access to more than just a bedroom, would they be able to claim a higher percent of household cost for utilities/internet/etc for example, etc.
I am also working with the NYT buy vs rent calculator. Renting part of a property is not included in the calculator. I am assuming renting part of the house offers advantages to buying a home without income so that the NYT results represent worse case. If I am missing something with this assumption, please let me know.
What happens differently on the sale of a partially rented house from a tax perspective? How should this be considered in our analysis? I have not located information on this yet.
Another approach that might be better is to simply live with DD/SIL without a rental agreement and continue with our current arrangement. DW and I would simply pay an agreed upon allowance which would help them with their expenses. But, they would not claim any of the rental benefits. And, they would not claim income. I guess it would be a gift or simply a family living together. This does not feel like the best financial approach but perhaps someone with more experience could comment that in terms of a way to make things easier, it is a better, if even slightly more costly than the 'tax' benefit approach.
Just a touch more background. Renting for DW is preferred. This idea to have DD/SIL buy and we rent, came as a way to help our children build some wealth. The NYT calculator is suggesting that buying or renting is a fairly close call, if we must move in about a 3 year time frame. Beyond that, buying makes sense. But, when we consider the 'gift/rental' money we would provide, there would be no additional cost for us and perhaps a benefit for them. Helping them along in an arrangement like this to their ER would make us happy.
Your advice and/or guidance to publications (I have done some research) is appreciated as always.