Tax Law (Questions About Taxes)/Not for Profit Rental?

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Question
My wife and I purchased a Second home in another state in July of last year.  The mortgage and tax records are in our name.  Our son and his family live in the house full time.  We also lived in the house 45 days last year and so met the mortgage requirements for a Second home.

Our son provides the money for the mortgage, taxes, and home insurance.  They take care of all maintenance costs.  We are not making a profit and donít intend to.  Nor do we intend to declare any deductions other than mortgage interest and taxes.  Do we have to declare the money our son provides for mortgage, taxes, and home insurance as rental income on Form 1040?  Can we take the tax deductions for all of the mortgage interest and taxes on our return?

Thank you,
Lea

Answer
Lea,

Thanks for your question.

You state that he provides the money for the mortgage, taxes, and insurance.  I presume that means he give you the money and you pay those items.  My answer is based on that.

You do need to report the income on line 21 of 1040 as a "rental not for profit."  The taxes and interest are deductible on Schedule A regardless.  If there is income remaining, you can deduct the insurance and other costs of ownership.  If profit still remains, you can take depreciation until you have a zero gain.  These are miscellaneous itemized deductions on Schedule A.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

Expertise

I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

Experience

I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

Organizations
FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

Education/Credentials
DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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