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I'm in a position where I could buy my parents house. I can afford it, and I would be doing it for two main reasons. Number one would be to help them, even though they don't seem to need it. And number two, I would finance it and would hope to write off the interest, since I would be owning it as a second home.
My parents haven't mentioned this to me. I'm just brainstorming it for myself. I see these reverse mortgage commercials all the time. If I did this, wouldn't this just be doing the same thing, except I'm the bank?
I'm sure I'm not the first person to inquire about this. What am I looking at from a legal standpoint or other ramification? Would I have to charge them rent, even it it was just $1 per month for legal paperwork reasons?
Hoping to get some input on doing this. They are 77 and doing well. I'm just thinking long term.
I have seen two family battles about buying parents home/land. Basically the root issue/problem was fair market value. We presently have a situation in my family. Not to go into all the details but the home was left to 3 of us and a child of one of us (not mine) wants to buy the home. I have said let us get two independent appraisals on the home value so we can establish a fair market value and the family member can buy it for the average appraisal price less 6% which would be a realtor fee if we involved a realtor.
Bear in mind that the new tax law has changed how much you can deduct in mortgage interest. I would do a little research before committing. Also bear in mind that the deduction limit for property, local income tax and state income tax is $10,000. That's going to cost a lot of two house owners. I'm lucky, because I live in a no income tax state and the property taxes on both my homes is less than $10,000. But your situation might be different.
Number one would be to help them, even though they don't seem to need it.
Hoping to get some input on doing this. They are 77 and doing well.
Are Mom & Dad sharing their financial data with a qualified professional?
Do they have the Elder Attorney? The CPA? The Financial Planner?
If so... go play some golf.
If not... then help connect them with one or more of those professionals.
Quote:
I'm just thinking long term.
If it turns out that they actually DO need financial & advisor help ... help them.
Selling a home comes into play at some point for most older couples
and how they manage that (when more often) can make a very big difference.
If they sell it now, depending on what they paid for it and when, they may owe substantial capital gains tax on it. That's the unfortunate implication for many older people who need to sell without buying another home.
If they sell it now, depending on what they paid for it and when, they may owe substantial capital gains tax on it. That's the unfortunate implication for many older people who need to sell without buying another home.
Not if the house has been their primary residence, which sounds to be the case (assuming their gain would be less than $500K). I think you're mistakenly remembering the day when another house of equal or greater value had to be purchased to avoid paying capital gains tax.
OP--it's good to think long term, but I wouldn't recommend buying their house. What are their estate plans? Would you inherit the house down the road? If they eventually need help, help them when the time comes. Buying their house seems to be an unnecessary complication that could have many downsides, particularly long-term tax implications.
My father-in-law did this, but it has been 30 years ago (or more). Basically, he was the one child with real money. He earned it the hard way, starting as a janitor at a company and ending up owning it. But, still, his brothers and sisters expected him to support their mother after the father died.
So he bought her house. She then had this money to live on. What he wanted to avoid was supporting his mother by himself and then having her house divided among all of his siblings. It didn't have a lot of value other than sentimentally, but it was his family homestead. After the money ran out, he simply supported her.
So is that what you are trying to do? And as others have said, will the new tax laws let you do it?
Didn't the new tax plan do away with interest deductibility on newly-purchased second homes?
It lowered it.
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