| With the massive recession of 2008 to 2009 in full | | | | to you. |
| swing, credit markets have dried up. Because of this, | | | | The next advantage is slightly less tangible but it is the |
| many of us have had to resort to creative forms of | | | | fact that your parents will enjoy the advantages of |
| financing, one of which is the classic transaction known | | | | renting. They won't have to necessarily take care of |
| as a sale-leaseback. You can create fairly decent | | | | the maintenance and upkeep anymore, that will be |
| amounts of income and estate tax savings if you buy | | | | your responsibility from now on. At the same time, |
| your parents house and then rent it back to them. | | | | they get to enjoy living in the same house that they |
| These sort of arrangements allow for tax deductions | | | | are used to. |
| for your parents if they are over 55 years old. If so, | | | | A sale-leaseback might make especially good sense if |
| tax law will allow them to exclude up to $125,000 in | | | | your parents are elderly and have trouble supporting |
| profit from the sale of the house. | | | | themselves. If you are already paying for their support, |
| There are many advantages of a sale-leaseback | | | | this may be an attractive way to continue supporting |
| arrangement. | | | | them at a tax advantage. |
| The first advantage is that future appreciation from | | | | And it's a way for your aging parents to save a little |
| the house isn't included in your parents estate any | | | | face because they won't be simply taking handouts |
| longer. This can be a fairly large tax break, right off the | | | | from you for support, they will be selling you their |
| bat. | | | | house which you will eventually be able to sell once |
| The next advantage is one for the person who buys | | | | they're gone. |
| the house... namely you. By owning your parents house | | | | There are several technicalities that need to be upheld |
| you can shelter some of your own income by | | | | in order to create a valid sale-leaseback arrangement. |
| deducting the expense of owning the house as will the | | | | For instance, the house has to be purchased at fair |
| upkeep and the depreciation on the house. | | | | market value, and your parents must sign an actual |
| The next advantage is for your parents; it's a very | | | | lease. It must be clear that your parents don't plan to |
| straightforward one in that they simply receive cash in | | | | buy back the property from you in the future, and it |
| exchange for the equity that they've built up in their | | | | also must be clear that your parents no longer maintain |
| house. Think of it as taking out a home-equity loan that | | | | control over the house. |
| they don't ever have to pay back. | | | | Before entering into one of these arrangements be |
| The next advantage is one that I mentioned earlier, and | | | | sure to run it by your local accountant or CPA to |
| that is that your parents will get a one-time $125,000 | | | | make sure you've crossed all the T.'s and dotted all |
| tax exclusion on the gain they receive to sell the house | | | | the i's. |