How can rental income be paid to someone other than the owner of the property for income tax purposes?

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How can rental income be paid to someone other than the owner of the property for income tax purposes?

My grandmother owns a house which my mother lives in. We would like to rent the house to pay for my disabled mother to live somewhere else. My grandmother does not want to occur any taxes from renting the property. Is there a way we can rent the house and have the rental income come to me or my mother?

Asked on July 20, 2011 Arizona

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

If your grandmother does not need the income from the house for her needs and if she is willing to gift you and your mother the home, the gifting process can possibly result in the income generated from the home to be your and your mother's income for income tax purposes and not your grandmother's income to report.

In this country, a person can give a certain amount of money to anyone tax free, around $11,000 or so each year to per person. Most people in a situation as you are asking about have the property appraised and a gift deed each year signed and recorded as to a fractionalized percentage of the home being gifted to the person who gets the new ownership. This gifting can be done on a yearly basis.

As new property owners, they can agree how the rent is to be allocated, usually in the amount of their ownership percentage.

Perhaps you can consult with a real estate attorney/tax attorney/estate planning attorney for more answers to your questions. Good luck.


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