Handling 2nd home/rental property in Indiana occupied by your adult child?

We bought a second home in Indiana for our daughter to live in while she goes to college. She is not on the mortage, but she is on the title and deed along with my husband and myself. She doesn't pay rent. She has one roommate right now, and will have another in January, both paying rent, of course. What is the best way to handle this tax-wise? Should we treat it as a second home or as rental property? Can we do both? I know people rent out rooms in their primary homes, and those homes wouldn't be considered rental property. The total of the two rents we will collect beginning in January are not enough to cover the mortgage, so we are not making a profit. Rent is 375 each, including everything; mortgage is 1000; we pay utilities, tv, phone. Also, would we be able to get a homestead exemption if we treat this as a second home? That would lower our mortgage payment. Our daughter will live in the house year-round. She works but probably makes less than $5000 per year. ThanksHandling 2nd home/rental property in Indiana occupied by your adult child?
Wow, this is a tricky question. I don't think you can take a deduction for a 2nd residence. To claim it as a 2nd residence you will have to live in the other residence part of the years. Your second residence deduction will equal the number of days you lived in the home.





If your daugther has 2 renters you may be able to claim 2/3 of the residence as a rental and take the appropriate deductions. I think your better off filing a quit-claim to take your daughter's name off the deed. Then you can claim her as a renter, charger her rent for say $350/month and if you want her to live rent free just give her a $350 allowance to cover her rent. Or you can even establish her as a resident manager and claim she pays no rent in lieu of managing the home. This may be tricky as you want to be able to prove it's a legitimate business arrangement. This way you can take the full deduction for the 2nd home as a rentall. Even if the rental doesn't cover the mortgage you should have more deductions from depreciation etc. to reduce your taxable income.





You should get a good tax accountant to help you with this. Tax laws change every year. I do think you can improve the overall situation.Handling 2nd home/rental property in Indiana occupied by your adult child?
Toss your daughter out, totally rehab the place and rent it out to people who are willing to pay $525 per month, or refinance so that you get a better rate and lower your mortgage life as close to 15 years as possible. The housing market is responding to the federal reserve interest rate increases, so if you have a nice place to rent out, people will rent as oppossed to buy for right now. Stop enabling your daughter unless she has a major mental illness or physical handicap, because believe me you're not helping her at all to become independent at all, just the opposite. Either buy her a condo or let her move in with me in Boston and I'll pay her $5,000 every 4 months just to clean the damn house.

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