Do i have to claim a gift on my taxes9/17/2023 ![]() ![]() For 2016, the annual gift exclusion is $14,000. If the daughter lives in the residence rent-free, the parents could be treated as having made a gift to their daughter equal to the fair rental value of the home. What if these parents wanted to be really generous and allow their daughter to live in the home rent-free? The parents could still deduct mortgage interest and real estate taxes on Schedule A, but they might run into gift tax issues. They would have to include all of the rental income received from their daughter in taxable income, but none of the rental expenses would be deductible, other than mortgage interest and real estate taxes, which would be deductible as itemized deductions on Schedule A. A ll of the days the home is rented to the daughter at less than fair rental value are considered personal days, so the rental portion is zero. If they go this route, they will have to allocate expenses between personal and rental expenses. The issue, in this case, is that the parents want to offer dear daughter a bargain, charging her less than fair rental value. To avoid having the rental days considered personal days, the property must be rented at fair market rates and be the renter's principal residence. When you rent a home to a relative, such as a spouse, child, grandchild, parent, grandparent, or sibling, any day rented at less than the fair rental price is considered a personal use day. ![]() Mortgage interest and real estate taxes may be deducted as itemized deductions on Schedule A, and the owner is not required to report rental income. When a home is rented for fewer than 14 days during the tax year, the home is considered a personal residence. In other words, they can reduce your taxable rental income to zero, but never generate a loss. Rental expenses may only be deducted to the extent of rental income generated by the property. ![]() are allocated between rental and personal use. When a vacation home is rented, expenses such as mortgage interest, real estate taxes, etc. When a home is mixed-use, it may be rented and used by the owner for personal purposes for more than the greater of 14 days or 10% of the number of days during the tax year that the unit is rented at fair rental value. If total expenses exceed rental income, the expenses may even generate a net loss. If a home qualifies as a rental property, expenses including mortgage interest, real estate taxes, homeowner association dues, utilities, and maintenance expenses can be used to offset rental income. ![]()
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