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09-06-2017 01:54 PM
My son in law lives in my second home and does not have legal title to the property. He pays me for the real estate taxes, provides all maintenance costs. He does not pay the mortgage or any other taxes or rent. Is he considered an equitable owner and if so has the ability to claim a Schedule A deduction for the real estate taxes?
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09-06-2017 06:58 PM
Welcome to the H&R Block community.
I've actually seen this question a few times and this is a situation in which nobody really wins. Your son won't be able to claim any deductions for homeowner expenses because one of the requirements for the real estate taxes, mortgage interest & mortgage insurance deductions is that you are a legal owner of the home (on the title) which he is not.
You, on the other hand, may also not be able to claim any expenses because you don't live in the home. However, you can claim expenses for 1 secondary home in addition to your primary residence if certain requirements are met. If you lived in the home at some point during the year (for a week or two for a vacation for example) and you paid the homeowner expenses yourself (you paying the expenses with your son-in-law's money doesn't count) then you can claim the expenses.
There is also a third option. If you were to treat the home as a not-for-profit rental, meaning that you're renting it to your son-in-law without the intent of earning a profit and you're renting it below market value for a rental home in your area, then you can report the rent you collect as income on Line 21 of the 1040. You would also be able to deduct expenses up to the extent of the rent received on your Schedule A. So if your son-in-law paid you $10,000 for the year to live in the house then you could deduct up to $10,000 worth of expenses on your Schedule A. The expenses do have to be deducted in a certain order though, and I'll gladly explain that later on if you end up going with this option.
If you have any other questions I'll be glad to help.
Senior Tax Advisor (Tampa, FL)