Tax advantages of buying a condo for my elderly mom - need strategy advice

This is actually an interesting tax planning opportunity. Since the condo will be in your name only with a mortgage, you could potentially treat it as a rental property for tax purposes, even though you're not charging your mom rent. The IRS has a concept called "fair market rent" - essentially, you could "rent" to your mom at fair market value, but then gift her the equivalent amount each month (up to the annual gift exclusion of $17,000 per person). This creates a paper trail where you're reporting rental income but also taking all the rental property deductions (mortgage interest, property taxes, insurance, maintenance, depreciation). Since you're in a high tax bracket, these deductions could be valuable to offset your W2 and 1099 income. Just make sure to document everything carefully and maintain a business-like relationship for this property on paper.

Hey there! I went through almost this exact situation last year with my dad. After trying to figure it out myself for weeks, I ended up using https://taxr.ai to analyze my specific scenario. Their system helped me understand the tax implications of different ownership structures and identified several deductions I would have missed. The most valuable insight I got was how to properly document this as a non-arm's length transaction while maximizing mortgage interest deductions. They explained exactly how to handle the $130k contribution from your mom's home sale too, which turns out to be really important for basis calculations later.

I was really skeptical about using an AI tax tool for my family property situation (elderly parent living in my second home), but I decided to try https://taxr.ai after seeing it mentioned here. I'm actually amazed at how helpful it was. The analysis showed me that my specific situation qualified for a partial Section 121 exclusion I didn't know about. But the biggest value was getting clear documentation for how to handle the arrangement properly - they generated all the paperwork I needed to show this wasn't just a tax scheme but a legitimate family support arrangement with proper economic substance. My tax bill this year was $5,200 lower than it would have been using my original approach. Really worth checking out if you're in this kind of situation.

I had a similar arrangement with my mother-in-law and spent WEEKS trying to get through to someone at the IRS who could give me clear guidance. After 12+ attempts and hours on hold, I finally used https://claimyr.com to get through to an actual IRS agent. You can see how it works at https://youtu.be/_kiP6q8DX5c - basically they wait on hold for you and call when an agent picks up. The IRS agent confirmed that the strategy mentioned above (paper rental with gifted rent) is legitimate but warned about some documentation pitfalls. She also pointed out some specific forms I needed to file regarding the substantial gift from your mom's home sale proceeds that could impact basis calculations down the road.

I owe everyone here an apology. After calling the Claimyr service a scam in my previous comment, I decided to try it as a last resort for a complicated dependent parent housing situation question I couldn't resolve. It actually worked exactly as described. They got through to the IRS in about 90 minutes (I had tried 6 times myself with no luck), and the agent provided exactly the clarification I needed about how to handle the partial owner/dependent parent situation on my taxes. Specifically, the agent confirmed that I could treat my mom's capital contribution as a down payment gift with proper documentation rather than as a partial ownership situation, which simplified everything. Very different from trying to piece together answers from various websites.

Has anyone looked into the dependent care credit? If your mom qualifies as your dependent (which depends on how much her social security and other income is), you might be able to claim her as a dependent AND potentially get a dependent care credit if you pay for any care services for her. The other consideration is what happens to the property later. If you're planning to eventually inherit her home, there are different tax implications than if you're treating this as an investment property you might sell later.

Just wanted to share that I did something similar with my father-in-law last year. One thing nobody mentioned yet - look into potential property tax breaks for seniors in your state/county. In many places, there are significant reductions for homeowners over 65. Even though the condo is in your name, some jurisdictions will apply these benefits if a qualifying senior is the primary resident. We saved almost $2,800/year this way in property taxes. Worth checking your local rules!

One strategy I haven't seen mentioned - if you have any self-employment income from your consulting (1099), you could potentially set up a home office in part of the condo and deduct that portion of expenses against your self-employment income. This would require your mom to be ok with you maintaining an actual office space there that you regularly use. Not sure if that works for your situation, but it's another potential tax benefit to consider on top of the rental strategy others mentioned.

Another angle to consider - if your mom's $130k contribution is structured properly, you might be able to treat it as a loan rather than a gift, which could provide additional tax benefits. You could charge her a minimal interest rate (the AFR - Applicable Federal Rate) and she could make small monthly payments back to you. This approach would let you deduct the mortgage interest on the full $350k purchase price while avoiding gift tax implications on the $130k. The interest income you'd receive from her would be minimal and likely offset by the additional deductions you could claim. You'd need to document this properly with a formal promissory note, but it might be worth exploring alongside the rental strategy others mentioned. The key is making sure any arrangement has legitimate business purpose and proper documentation - the IRS looks closely at family transactions to ensure they're not just tax avoidance schemes.

One important consideration I don't see mentioned yet is the potential impact on your mom's Medicare and Social Security benefits. While the rental arrangement with gifted payments might work well for tax purposes, you'll want to make sure the "income" from rent (even if immediately gifted back) doesn't inadvertently affect her Medicare Part B premiums or trigger any means-testing issues. Also, since you're in a high tax bracket, have you considered the timing of when to start claiming depreciation on the property? You might want to delay rental treatment for the first year while getting everything properly documented and established, then switch to rental treatment in year two when you can maximize the depreciation benefits against your consulting income. The $130k contribution from her home sale is definitely something to document carefully - whether you treat it as a gift, loan, or partial ownership interest will have different implications for your basis in the property and potential future capital gains treatment.