FOR BREAKING NEWS VISIT WWW.QNS.COM FEBRUARY 1, 2018 • THE QUEENS COURIER 25
Tax Breaks: Buy Parents’ Home, Rent It Back to Them
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41-18 CRESCENT ST
LONG ISLAND CITY, NY 11101
47-46 VERNON BLVD
LONG ISLAND CITY, NY 11101
Hernan Barona, E.A
BY JOHN SAVIGNANO, CPA
Say your aging parents live in a home that
has appreciated in value, but they’re no longer
reaping any of the homeownership tax breaks
during their retirement years. Sound familiar?
Good News: With one stroke of the pen
both you and your parents can win: They’d
gain instant access to their home equity (without
moving) and you’d pick up some generous
new tax deductions.
Buy your parents’ house, and then rent it
back to them-at the going rate.
Your parents’ mortgage is either paid off
or the payments represent mostly principal
at this point. Even if they still take interest
deductions, your parents’ tax bracket might
be low in retirement, so those deductions
don’t provide much tax savings.
Here are two good reasons for your parents
to opt into this plan:
1. It puts cash in their pockets without them
dipping into a home equity loan.
2. It allows them to put their money into
safer investments than the real estate market.
Transferring the house. To avoid gift-tax
complications, pay a fair price for the home.
Support the buying price with a qualified
and independent appraisal. Then, both sides
should enter into a lease at a fair rental value.
One benefit: Courts have said that landlords
can reduce their fair-market rent by 20% when
renting to relatives. That lower rent reflects the
savings in maintenance and management costs.
Once you own your parents’ house, you’re
entitled to reap the tax benefits of owning
That includes taking write-offs for operating
expenses, such as utilities, maintenance,
insurance, repairs and supplies.
You also can claim depreciation deductions
for the home, but you can’t depreciate
the cost of the property apportioned to land.
You can use these deductions to offset the
rental income received from your parents.
You can take any suspended losses when you
sell the house.
Eventually, your parents won’t be able to live
in the house. Then, you can sell it, rent it to
another tenant or move in. If you move in and
make it your principal residence for at least
two years, you can sell it and shelter another
$250,000 to $500,000 worth of capital gain: a
true tax bonanza!
John Savignano is a partner with Savignano
Accountants & Advisors located at 47-46
Vernon Blvd., Second Floor, in Long Island
City. If you have any questions or require
additional information, please call John at