Second home purchase

[Paul DeLeon]

I have an opportunity with a family member to jointly purchase a home for the family member to live in as their primary residence. They will pay all PITI and repairs while there. The home is in Arizona. I live in California.

The loan is to be in my name (credit is better). The loan is deemed to be for a second home. I am "on paper" and considered to be the owner.
No rental money will be asked to be paid to me as the family member is paying the mortgage.
Do I have the ability to take interest and taxes as a deduction on my return? Or does the family get those write-offs?
What happens upon sale or if the family member should pass away?
Do I file any yearly tax information on my 1040?

The thought is I will receive the proceeds from the sale when or if the property is sold. 

Appreciate your soonest reply as the opportunity/closing is scheduled for mid-August
thanks
Paul

[Ty Coutts]

Hello Paul,

As the legal owner and borrower on the loan, you may be eligible to deduct mortgage interest and property taxes on your tax return. However, this situation is complex due to the family arrangement. The IRS generally allows deductions for second homes if you use the property for personal use for more than 14 days or 10% of the days it's rented, whichever is greater. Since your family member is paying the PITI, there could be questions about whether these payments constitute rental income or gifts.

If you're the legal owner, proceeds from the sale would typically go to you. However, you would also be responsible for any capital gains taxes. If the family member passes away, the property would remain in your name unless other arrangements are made.

Given the complexity of this situation and the impending closing date, it's crucial to seek professional tax and legal advice as soon as possible. A tax professional can provide specific guidance on how to structure this arrangement to comply with tax laws and maximize any potential deductions. They can also advise on the proper way to report this on your tax returns.

Hope this helps,

Ty

[Paul DeLeon]

Ty, do you see any issues with the fact the daughter is obtaining the loan as a Second Home but not using the loan for a second home?

From a lender's perspective? 

I know that generally interest rates on Second Homes are greater than on personal homes but are the rates equal to Rental properties?

Are there fewer qualifications on second home loans versus rental investment loans?

Thanks