The parents lease the property to the child, who must pay the parents a fair monthly rental for the exclusive use of the building. Both the parents and the child, as co-owners, are entitled to take tax deductions on the property. Advantages SEA makes mortgage financing easier to obtain because banks consider parents' income, as well as the child's, when evaluating the mortgage loan application. Both the parents and child sign the mortgage. If this technique is used to enable a child to buy residential property, then the child obtains the benefits of tax deductions on interest and property taxes instead of making just nondeductible rental payments.
Parents also receive rental income from the child.
An attorney can provide you with complete details on how to set up an SEA and the tax benefits and risks involved. All Rights Reserved. LIVE, REAL TIME Global Streaming Financial News and Business Information. Excellent legal service at your convenience. For less than you'd expect.