MUScoop
MUScoop => The Superbar => Topic started by: Cheeks on February 18, 2019, 12:15:47 PM
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Colleague and I were talking about this today. Is the following scenario legal.
Purchase apartment or home near college campus. Rent the property to your family member who is a college student, but use 529 funds to pay that rent (and thus to pay the mortgage). Seems like a way to use tax free money to pay the mortgage. This seems legal and qualifying under the 529 plans, but would like someone with some expertise on this if they know.
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Colleague and I were talking about this today. Is the following scenario legal.
Purchase apartment or home near college campus. Rent the property to your family member who is a college student, but use 529 funds to pay that rent (and thus to pay the mortgage). Seems like a way to use tax free money to pay the mortgage. This seems legal and qualifying under the 529 plans, but would like someone with some expertise on this if they know.
Not a tax accountant or tax lawyer, but I did stay at a Holiday Inn once. Pretty sure that you'd be paying yourself rent, and would then have to pay taxes on that as income.
Not sure how you'd be paying mortgage tax free. Taking the money out would be tax free, but you'd still have to pay taxes on the revenue generated from rent.
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I'm not a tax expert, but one limitation on "room and board" as a qualified 529 expense is that the total cannot exceed the college's estimated cost of living off campus. So if the school estimates a $15,000/year expense, that would be the cap on total mortgage payments plus the cost of food.
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Not a tax accountant or tax lawyer, but I did stay at a Holiday Inn once. Pretty sure that you'd be paying yourself rent, and would then have to pay taxes on that as income.
Not sure how you'd be paying mortgage tax free. Taking the money out would be tax free, but you'd still have to pay taxes on the revenue generated from rent.
Yes, understand that part. When I say tax free, I mean the portion going into the 529 which isn't taxed. Sorry I wasn't clearer.
I have to believe people are doing this, if it is legal and square with the gov't.
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I'm not a tax expert, but one limitation on "room and board" as a qualified 529 expense is that the total cannot exceed the college's estimated cost of living off campus. So if the school estimates a $15,000/year expense, that would be the cap on total mortgage payments plus the cost of food.
Correct.
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As a landlord, I can confirm that the rental income you'd receive would be income taxable. The way you structure the ownership of the building determines how the owner is taxed (individual income tax rate vs. LLC, LLP, or corporation, etc.). Can't offer a professional opinion on the 529 aspect of it, though it seems legal.
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I also believe you would have to charge yourself rent that is commensurate with the rental value in the area so if the typical rent in the area would mean you'd exceed the room and board limit that would be an issue, etc. Couldn't even begin to decide if using the 529 to pay yourself is legal or not.
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It is permissible, we asked the same question a few years ago. We did not do it, but you can buy a property and rent it to your college student child at market rate allowed in that area that comes under the guidelines of the 529 rules.
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It is permissible, we asked the same question a few years ago. We did not do it, but you can buy a property and rent it to your college student child at market rate allowed in that area that comes under the guidelines of the 529 rules.
I mean, I know people forget to long out of their burner account, but to forgot to log out of your burner personality is next level
;D
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I mean, I know people forget to long out of their burner account, but to forgot to log out of your burner personality is next level
;D
I’m not following
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I’m not following
It's a reference to that some believe Chicos is also WarriorDad
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It's a reference to that some believe Chicos is also WarriorDad
Don’t forget Billy Hoyle and others....don’t want to short change the entire team
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As a landlord, I can confirm that the rental income you'd receive would be income taxable. The way you structure the ownership of the building determines how the owner is taxed (individual income tax rate vs. LLC, LLP, or corporation, etc.). Can't offer a professional opinion on the 529 aspect of it, though it seems legal.
I think the only way to really benefit from the 529 aspect would be to set up an LLC or other corporation. Buy the property as the organization so that you can write off loses associated with any loans etc. one may have from the purchase, so that the tax write-offs would cancel out some of the rental income.
Pay yourself pass-through income.
Seems like a lot of effort to scheme ones way out of a little taxes.
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I think the only way to really benefit from the 529 aspect would be to set up an LLC or other corporation. Buy the property as the organization so that you can write off loses associated with any loans etc. one may have from the purchase, so that the tax write-offs would cancel out some of the rental income.
Pay yourself pass-through income.
Seems like a lot of effort to scheme ones way out of a little taxes.
Probably is, thus the question. I pay my taxes honestly and to the penny, 100% legal and that will always be the case. I will ask what is legally allowed as my right to do.
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I usually tell my clients to make smart investment decisions and then look to taxes. So in this case the thing is your son or daughter would need housing and have to pay for it. Does it make good financial sense to purchase a property and let them live there? Regardless of whether you formalize the rent payments we can all agree there is a cost associated with that. I have clients that have done it both ways, formalize rent or treat it as gifted. I would not think that either way would impact the amount that can be used from the 529 plan as payment for housing as that number will be set be the university. Of course your deductions might be limited. 5 people, 4 formally pay rent, 80 percent deduction of expenses on schedule E. That type of analysis....
Of course there are other concerns as well... Does you son / daughter want to live there. Who will manage the property etc.....
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Don’t forget Billy Hoyle and others....don’t want to short change the entire team
It is perplexing why people might think you use multiple accounts, eh Hoop?
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It is perplexing why people might think you use multiple accounts, eh Hoop?
Yes, it is. Like Crash, no need to have multiple ones at the same time. Too difficult to remember at my age. But watching the paranoia of you and others labeling others is alone worth the popcorn.
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Yes, it is. Like Crash, no need to have multiple ones at the same time. Too difficult to remember at my age. But watching the paranoia of you and others labeling others is alone worth the popcorn.
I'd say it was slightly amusing the first 500 times …… now tiresome and lame
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I'd say it was slightly amusing the first 500 times …… now tiresome and lame
We agree, but people keep making the claims up....that's on them.
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Why not simply set up an LLC to own the house and pay the LLC instead of yourselves?
Wal-Mart does it all the time so they can expense their mortgages.
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As a landlord, I can confirm that the rental income you'd receive would be income taxable. The way you structure the ownership of the building determines how the owner is taxed (individual income tax rate vs. LLC, LLP, or corporation, etc.). Can't offer a professional opinion on the 529 aspect of it, though it seems legal.
One of the intrinsic benefits of real estate as an investment is that with capital expense/depreciation and other tax breaks, it's the only investment I can think of that's essentially designed to realize a taxable loss even when you have positive cash flow.
So if you're a landlord who's worried about income taxes on your real estate holdings, you're a bad landlord... either "bad" as in you need to hire an accountant who specializes in real estate or "bad" as in Elijah Rashaed.
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Yes, it is. Like Crash, no need to have multiple ones at the same time.
Which of course is PRECISELY what you've done, as well as run through many multiples of accounts where you've tried to hide your identity after being banned repetitively. To pretend that other posters are off base for calling you out for the exact thing that you've done is...well, so very, very deranged and Chicosesque.
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Which of course is PRECISELY what you've done, as well as run through many multiples of accounts where you've tried to hide your identity after being banned repetitively. To pretend that other posters are off base for calling you out for the exact thing that you've done is...well, so very, very deranged and Chicosesque.
Not at the same time, which was my point.
At any rate, appreciate the responses from folks. Meeting with an expert on options next week, but there's been some good stuff here. G' Day.
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set up an LLC or other corporation. Buy the property as the organization so that you can write off loses associated with any loans etc. one may have from the purchase, so that the tax write-offs would cancel out some of the rental income.
Pay yourself pass-through income.
Just to clarify, an LLC is not required to write off rental expenses, or realized pass through income. Though it may be advisable.
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Just to clarify, an LLC is not required to write off rental expenses, or realized pass through income. Though it may be advisable.
Thank you sir. I assume you use an LLC for the rental properties you own?
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When you get the results from your meeting please post. Would be interesting to hear what you learn.
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It is perplexing why people might think you use multiple accounts, eh Hoop?
i'll bet you wear your hair tight'er than these beauts-take a breath man
gladys kravitz syndrome
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i'll bet you wear your hair tight'er than these beauts-take a breath man
gladys kravitz syndrome
Occupying a piece of their mental space for years apparently