Post # 1
OKAY so Fiance and I are buying the house we currently rent from my mom. It was my grandmother’s and the house my mom grew up in. We’re going to continue to pay my mom, interest free, monthly payment towards the house. Interest free seller financing. We’ll have a contract of deed and go through our lawyer.
Now we are first time homebuyers. I am not eligible for the credit as it is my mom but Fiance is if we put the house completely in his name until 2010 is over and we’re married. My question is, what are the ramifications for my mom and her taxes? Does she need to claim anything? She won’t be getting any interest to claim as income. Will she have capital gains? The house is only $200,000. I want to make sure that this is a win/win for everyone involved and no one is getting screwed over. Any info would be greatly appreciated!
Post # 3
She may have to pay some capital gains on the sale because she has not lived in the home. Recently, the tax law was changed so that time after 2008 is not counted as exempt if you aren’t living in the home. I would check with an accountant to find out the exact calculations (I’m a tax accountant but I have never done this).
EDIT: Here is some info on the changes: http://www.realestatewebmasters.com/blogs/mikey/6481/show/
Any time after January 1, 2009 that your parents rented out the home will be considered “Non Qualified Use” and if they make a gain on the sale of the property, that percentage will be taxable. It is taxed at the capital gains rates, which are lower than normal tax rates.
Post # 4
Thanks so much for some info. Since we’re kind of doing this under the table, would the IRS even know about the sale of the house or whether or not she lived in the house prior? We have been renting under the table as well and she has not been claiming that as income.
And so if there is no profit they are not required to pay anything?