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Thinking about buying a house for the parents so they can literally live next door to one child. Will help with the down sizing and with elder care.

I know I can claim property taxes on the 1040, but what other expenses can be taken and what other things to think of?

This will be a cash transaction, no mortgage.

JLC
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JLC: "Thinking about buying a house for the parents so they can literally live next door to one child. Will help with the down sizing and with elder care.

I know I can claim property taxes on the 1040, but what other expenses can be taken and what other things to think of?

This will be a cash transaction, no mortgage."


Not sure about the answer to your question, but if you own the house and your parents live ther without paying rent (or below free market rent), consider whether there is potential gift tax issue lurking in the weeds.

Regards, JAFO
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, but if you own the house and your parents live ther without paying rent (or below free market rent), consider whether there is potential gift tax issue lurking in the weeds.

Hadn't thought of that, but seem to have an answer here.

http://www.forbes.com/sites/deborahljacobs/2011/08/22/6-ways...

As long as the rent is below the gift tax exclusion, it seems we are good. So DW & I could combine are $14k gift to make it $28k, I think that is more than that rent this place could command. Push comes to shove, $28k to dad and $28k to mom makes for $56k total, plenty of breathing room.

JLC
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Thinking about buying a house for the parents so they can literally live next door to one child. Will help with the down sizing and with elder care.

I know I can claim property taxes on the 1040, but what other expenses can be taken and what other things to think of?

This will be a cash transaction, no mortgage.

JLC

=======================
If you're subject to AMT, the property taxes won't do you any good, either.

Bill
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JLC:

<<<but if you own the house and your parents live ther without paying rent (or below free market rent), consider whether there is potential gift tax issue lurking in the weeds.>>>

"Hadn't thought of that, but seem to have an answer here.

http://www.forbes.com/sites/deborahljacobs/2011/08/22/6-ways......

As long as the rent is below the gift tax exclusion, it seems we are good. So DW & I could combine are $14k gift to make it $28k, I think that is more than that rent this place could command. Push comes to shove, $28k to dad and $28k to mom makes for $56k total, plenty of breathing room."


I agree that as long as you are married and both you parents are alive, then 14k * 4 is a lot of free rent, but do not ignore other gifts you might make during the year, and it potentially changes if you are no longer married or you have only one surviving parent.

Good Luck.

Regards, JAFO
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If your parents can qualify as your dependents, you shouldn't need to be concerned about fair market rents, gifting or a schedule E. Like minor children, they would be your dependents that you could claim as dependents on your tax return. And if they require dependent care and you are working, you may also be eligible for the dependent care credit.

From About.com:

Six Criteria for Qualifying Relatives (my adds are in italics)

1. The dependent cannot be a qualifying child/parent of another taxpayer.
2. The dependent earns less than the personal exemption amount during the year. For 2013, this means the dependent earns less than $3,900.this is gross income, for which Social Security would not count
3. The taxpayer provides more than half of the dependent's total support during the year.
4. The taxpayer is related to the dependent in certain ways.
5. If the dependent is married, the dependent cannot file a joint return with his or her spouse.except to get a refund of any withholdings or estimated tax payments
6. The dependent must be a citizen or resident alien of the United States, Canada, or Mexico.

http://taxes.about.com/od/dependents/a/Dependents_3.htm

BruceM
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If your parents can qualify as your dependents, you shouldn't need to be concerned about fair market rents, gifting or a schedule E. Like minor children, they would be your dependents that you could claim as dependents on your tax return.

Just a note for people who tend to grab one post and run with it. This is the first time in this thread that the issue of dependency has been raised, and it carries its own can of worms. I'm not so convinced that dependency eliminates any gift tax consideration. Pros?

And if they require dependent care and you are working, you may also be eligible for the dependent care credit.

Again, in the context of this thread (buying a house for the parents to live in) they would not qualify OP for the dependent care credit even if they needed 24/7 care that OP paid for. The qualifying person for that credit must live with you for more than half the year. After all, the point of the credit is to give you a little break since you have to hire help while you go make a living instead of providing the care yourself.

See Pub 503.

Phil
Rule Your Retirement Home Fool
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If your parents can qualify as your dependents, you shouldn't need to be concerned about fair market rents, gifting or a schedule E. Like minor children, they would be your dependents that you could claim as dependents on your tax return.

Just a note for people who tend to grab one post and run with it. This is the first time in this thread that the issue of dependency has been raised, and it carries its own can of worms. I'm not so convinced that dependency eliminates any gift tax consideration. Pros?


The answer may be "It depends". See http://cbapp.csudh.edu/faculty/accounting/rmalamud/Elder0501... for one opinion. According to the author of this article, there is no clear resolution to this question in IRS regs/Rev. Ruls. but he relies on a proposed, but never adopted, reg to exempt "expenditures ... in satisfacton of (one's) legal obligation to provide ... support". At the time of the writing of this article, 30 states required children to provide support for indigent parents.

It is apparent to me that if an answer to this question is important, you (the reader, not necessarily the OP) should seek out competent professional assistance from someone who can do all of the necessary research as it applies to the specific details of your situation.

Ira
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...30 states required children to provide support for indigent parents....

Had never heard of this before, so did some quick looking. Fortunately, Idaho did away with this law 1-2 years ago. For any of you with parent issues, you might want to check the statutes of the state in which your parents reside and, if necessary, talk with a lawyer and start building the case for why you should have no financial liability for your parents--just in case someone decides to start enforcing these laws rigorously.

Kathleen
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At the time of the writing of this article, 30 states required children to provide support for indigent parents.

Are you talking the filial responsibility act? That's actively pursued here in PA, though mostly by nursing homes that continue to treat the parent after their funds run out. I didn't think it was a blanket sort of providing for them in every way.

The real kick in the head is that while some states make the kids responsible for their parents' bills, they won't let them keep their parents from imploding financially. No longer an issue for me as both my parents have passed, and MIL is well set, but Sis and I had to look in to legally restraining Dad financially, and were basically told it wouldn't happen. The once fiscally conservative man, who was capable of informed rational decisions, became manic after a long surgery and for months made large dollar gambles at whim with hundreds of thousands of dollars. His financial abilities were compromised from that point on, and he treated his investments alternatively in a reckless way or like an ostrich with his head in the sand.

We become our own worst enemy as we age. I would love to know how to protect ourselves and our kids from our future financial idiocy as we get older.

IP
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We become our own worst enemy as we age. I would love to know how to protect ourselves and our kids from our future financial idiocy as we get older.

I am neither a lawyer nor a financial advisor.

Perhaps some kind of non-revokable trust where you no longer have control of the principle.
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At the time of the writing of this article, 30 states required children to provide support for indigent parents.

Are you talking the filial responsibility act?


I don't know. The author mentioned that there were 30 states that had some such law. Since the article was several years old, I added the caveat that the number was as of the date of the article. I don't know the specific nature of the various laws nor whether there have been any changes in number or application of such laws.

As I stated before, is someone thinks that this issue has relevance to their situation, they should find competent professional counsel to advise them.

Ira
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As I stated before, is someone thinks that this issue has relevance to their situation, they should find competent professional counsel to advise them.

===================================

Yep.

Here's a more current article.

http://www.elderlawanswers.com/son-liable-for-moms-93000-nur...

Sounds a bit like he didn't have a good lawyer.

http://www.pacourts.us/assets/opinions/Superior/out/A36025_1...
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