Buying A Home For Your Son/Daughter?
Many parents would like to help their offspring become homeowners and realize the "American Dream". Here are a few tips that may help:
- When they go off to college: Parents can buy a condo or home as an investment. Set up their child in one bedroom, rent out the other rooms to other students and get the benefits of owning an investment property. Even better: Instead of sending their son/daughter pocket money, hire him/her as the property manager - responsible for upkeep and rent collection - and pay them tax-deductible compensation..
- When the children are ready to own their place:
- You can give them a cash gift. Individuals are allowed a maximum gift of $13,000 per year tax-free. That means a couple can give their child and his/her spouse up to $52,000 in tax-free gift money per year!
- Set up a qualified personal residence trust, or QPRT. Parents buy the home they want to give to their offspring into a trust. At the end of a specified time, the home passes on to the children and no taxes are due.
- Give them a loan - to be considered not a gift, loan terms (i.e. interest) has to exceed market rates (currently low). You can use the $52,000 gift exemption to pay interest/principal!
Of course, to do any of these things you must consult your CPA (tax laws change every year) and attorney to do it right. And your REALTOR can help you find the perfect home!