if we purchase a second home and my mom lives in it, while we live in another state, and she pays part of the expenses, is that considered rental

Asked by Sharleen, Wareham, MA Tue Apr 20, 2010

income?

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5
Haneroad, Home Buyer, Centerville, MA
Tue Aug 28, 2012
Eventually we will be in that same position. Great question.
0 votes
Ken Lambert, , Exeter, NH
Mon May 3, 2010
Hi- It depends on who is asking. Are you looking to have this rental income from Mom help qualify you on the mortgage needed to buy the place? If so, then probably not. Most lenders will not allow that for a mother/ immediate family member. Unless there is a lot of documentation and she has done that in the past with you,etc.

If its an IRS question, then I would assume you don't want to show it as rental income anyhow. You'd have to ask you CPA that.

I guess it depends on if you are getting a mortgage or not. And what kind of mortgage. If someone is paying you rent for 6+ months a year, it is an investment property not a vacation home. And investment properties are harder and more expensive to finance for you.
If I can be of any help, please let me know. Thanks,
Ken L.
0 votes
Francis grop…, Agent, Onset, MA
Sun May 2, 2010
If she is paying just her own expenses like phone, cable, heat, etx I do not believe it would be considered rental income, but if she were to start paying taxes or insurance or any of the mortgage then maybe. It depends, ask your tax professional. Please let me know if you would like any listings for the Wareham area. thanks much
0 votes
Pat & Steve…, Agent, Westlake, OH
Fri Apr 23, 2010
Sharleen:

I am a Realtor & an Attorney (30yrs), licensed for both only in Ohio, so I cannot & do not represent you. Therefore, what I write here is only my personal opinion. My partner & I had a similar sitiation within the last 6 months. For lending purposes, the loan was considered an investment loan (which meant a higher rate & a required down payment). The payments from the relative to the owner are classified as rental income, meaning investment income. This is is the case even though there is no lease of any kind, just an understanding that the relative is going tp pay the owner. Again, this is my personal opinion. I suggest that you talk to an accountant about the actual tax implications for your specific situation!
0 votes
Stephen Suech, , Boston, MA
Fri Apr 23, 2010
Where you are in another state, the new home could be considered a second home for lending purposes. As for whether that would be considered rental income depends on how you file your taxes. Consult with your tax accountant.
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