Can my father write off the cost of carrying a property for a year if he rents it out to me?
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My father recently bought a property with an old cottage on it and he would like to rent it to me for a year while he prepares to develop it. Can he write off the interest on the cost of carrying the property if he rents it out? Is it an issue that I am a family member? It would be fair market; I would pay a reasonable amount in rent.
The family relationship does not matter if you pay a fair rent. He has to report the rent income and can write of the interest and taxes on the property, as well as other expenses such as repairs, insurance, etc. However, he cannot write the cost of improvements, which ave to be capitalized.
Yes, as long as you are paying MARKET rent.
References :
The family relationship does not matter if you pay a fair rent. He has to report the rent income and can write of the interest and taxes on the property, as well as other expenses such as repairs, insurance, etc. However, he cannot write the cost of improvements, which ave to be capitalized.
References :
The fact that you are related is of no consequence to the proposed transaction. However, your father can write off only the portion of the property’s carrying costs that apply to the cottage. Expenses related to other structures on the property, that are not part of your lease, cannot be expensed. Be careful when considering what is an "expense". Repairs of faulty items may be OK, but beyond a repair, other construction cost may be not allowed but will need to be capitalized, meaning they are considered to be part of the cost basis of the structure and must be depreciated instead of expensed.
References :