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Here's a great tax deduction that benefits both you and your parents!

Let's suppose your elderly retired parents live in their home which is paid offno more mortgage. Since your parents are no longer able to reap any of the benefits of homeownership on their taxes, it's time to create some new deductions that will help you and your parents.

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All you have to do is buy your parents home at the going rate and lease it back to them! Your parents will gain instant access to the equity that has accumulated in their home and you will get a deduction for renting the home.

Most retired people take the standard deduction and no longer itemize since they no longer have the hefty mortgage interest to help qualify them to take the deduction. Since your parents income is mostly likely limited, they are in a lower tax bracket and they no longer receive a deduction for mortgage interest, this works out great!

You must pay a fair price for the home. Be sure to get an independent appraisal. Your parents can take the money you paid them for their home and work on their bucket listdo some of the things they have always wanted to do. Believe me, this will make them very happy.

This is a great strategy for people who will be leaving their home to their heirs upon their demise. This way, the children get more benefit out of the property much sooner and the parents are able to enjoy the value of the home while they are alive.

Not only do you end up being the hero & making your parents very happy, you also get some generous tax deductions!

Next you will need to draw up a lease charging your parents a fair amount for rent. Now you are ready to take all the deductions available to landlords with rental property.

These include the normal deductions for mortgage interest, taxes, insurance, repairs, maintenance, supplies and depreciation, etc. These deductions will offset the rental income you receive from your parents. Since the deduction phases out for people with incomes from $100,000 to $150,000, you may need to form an LLC to take full advantage of the deductions.

It is also a great idea to house the home inside an LLC. Most real estate guru's agree that an LLC is the best business entity to hold real estate and has the best tax treatment when you sell the property.

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Posted in Financial Services Post Date 04/08/2021


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