Your parents who are 75 and 70 of age, own a house they purchased 40 years ago for $30,000 with a current market value of $300,000. Your parents paid off the mortgage; they pay real estate tax $5,000 a year. Your parents no longer itemize their deductions, because their income from social security and small interest is below taxable level of income.
Now, your parents do not benefit from the ownership of their home. Now, they need money to cover their living expenses, medical expenses, etc. but they do not want to borrow. They are looking for a solution to their problem, while they like to enjoy their home, where they live their best years of life.
Excellent advice. You and your parents are the winners if you follow this advice, here is how it works. Buy your parentsí house then lease it back to them for life. You can achieve your goal going through following steps:
1.Obtain appraisal for land and improvement.
2.Rent the house to your parent at the going market rate. You can legally reduce the rent 20% below fair rental value.
3.Your parents will have cash in their hand without need to refinance.
4.You as a home owner will benefit from deduction of house expenses and depreciation which in many cases save you large amount of taxes.
5.Your parents will avoid the complication of gift tax.
6.If your parents moved-out, you can move-in as your principal residence for at least (2) years and sell it. Any gain will not be taxable if does not exceed 250,000 if you are single or 500,000 if you are married filing jointly.