Tag Archives: College

Why pay for a college dorm when you can invest in a college home!

05 Monday May 2025

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As your child prepares to embark on their college journey, you may be exploring housing options that make financial sense. Rather than committing to expensive dormitories or rental apartments with no potential for return, consider investing in a condominium for your student to reside in during their studies. This strategy not only provides a comfortable home but also positions you to build equity and potentially generate profit. By selecting a condo with additional bedrooms, you can lease space to your child’s peers, offsetting ownership costs.

Many parents have successfully implemented this approach, purchasing a condo for their student’s college years—typically four to six years—and selling it post-graduation for a substantial return. The longer you hold the property, the greater the likelihood of a profitable sale. Additionally, the tax advantages associated with this investment can enhance its appeal. Below, we outline the key benefits and considerations.

Tax Advantages of Condo Ownership

Under standard tax regulations, deductions for expenses related to a residence used significantly by family members are restricted. However, a valuable exception applies when you rent the property at market rates to your child, who uses it as their primary residence. This allows you to deduct rental losses, subject to passive activity loss (PAL) rules, which we’ll address later. By purchasing a condo and leasing it at fair market rates to your student and their roommates, you can unlock significant tax benefits.

Deductible expenses include:

  • Mortgage interest and property taxes.
  • Mortgage points, amortized over the loan term.
  • Operating costs such as utilities, insurance, homeowner association fees, repairs, and maintenance.
  • Depreciation of the building (excluding land) over 27.5 years, offering tax savings while the property may appreciate in value.

To facilitate rent payments, you can provide your child with an annual gift of up to $13,000 (or $26,000 if married) without incurring federal tax consequences. Your child can use these funds to pay you market-rate rent. To ensure compliance, have your child issue rent checks clearly labeled as such and maintain a dedicated bank account for rental income and expenses. These steps help safeguard your investment should the IRS review your records.

Need to purchase a college home? Give us a call! 904-515-2479 The Hanley Home Team of Keller Williams Realty Atlantic Partners Southside HanleyHomeTeam.com

Protecting your college student’s possessions at school

15 Thursday Sep 2016

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If you have a son or daughter heading off to college, you’ve probably sent them along with most of their most prized possessions. Laptop, stereo, smartphone, mountain bike… it all adds up to several thousands of dollars of personal gear.

So what happens if they get robbed? Will you be stuck for the replacement costs, or are they covered on your homeowner’s insurance policy?

Believe it or not, the insurance policy on your home might just cover what your kid takes to school. But there’s a catch: Many policies only cover the student if they live in a dorm on campus. If they’re in an apartment or house on their own, you might not be covered.

One alternative to covering your student’s possessions while they’re away at school is renter’s insurance. Renter’s insurance is a very affordable way to make sure you’re not out thousands if there’s a break-in. For as little as $15 – $20 a month you can have a bit of piece of mind you won’t find yourself in the Apple store again plunking down for a new Macbook Air.

A few notes:

1. Your student won’t be covered by their roommate’s policy. Policies are specific about covering a single policy holder.

2. A renter’s policy can also include liability coverage, much like your homeowner’s insurance.

3. Taking inventory of possessions and keeping detailed records (with photos and serial numbers) is essential. It provides helpful evidence of ownership in the case of a claim.

You’ll want to talk to your insurance agent about your specific situation, needs, and your policy. Don’t overlook this opportunity to protect your student and your wallet.

Need a referral to an insurance agent? We can help recommend a few we know and trust: Kevin and Jennifer Hanley, REALTORS Keller Williams Realty Atlantic Partners Southside 904-422-7626 http://www.HanleyHomeTeam.com

Skip the Dorm, Buy Your Kid a Condo

12 Thursday Jul 2012

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By Bill Bischoff
May 14, 2012, 12:02 a.m. EDT
MarketWatch
http://www.marketwatch.com/story/skip-the-dorm-buy-your-kid-a-condo-2012-05-14

Prices in many real-estate markets may be close to bottoming out. We hope. So the old adage about buying low may be something to consider if you have a kid who will soon be heading off to college. The idea is to buy a condo for the kid to live in while attending school. That way, you’ll avoid paying through the nose for a dorm room or apartment with no hope of any profit. And if you buy a condo that has some extra space, you can rent it out to your kid’s friends and offset some of the ownership cost.

Lots of parents have made good money by following this strategy for the four or five or, God forbid, six years their kids spent in college and then selling the condo after graduation. Of course, the longer you can hold onto the property, the better the odds of cashing out for a profit. The other key factor to consider is the tax benefits. Here’s what you need to know.
Deducting college condo ownership expenses

The tax rules generally prevent you from deducting losses incurred from owning and renting out a residence that’s used more than a little bit by you or a member of your immediate family. However, a favorable exception applies when you rent at market rates to a family member who uses the property as his or her principal home. In this case, you can deduct tax losses from the rental activity (subject to the passive loss rules, which I’ll explain later). This beneficial loophole is open for you if you buy a condo and rent it out to your college-going child (and roomies, if any) at market rates.

You can deduct the mortgage interest and real-estate taxes. If you pay mortgage points, you can amortize them over the term of the loan. You can also write off all the other operating expenses—like utilities, insurance, association fees, repairs and maintenance, and so forth. As a bonus, you can depreciate the cost of the building (not the land) over 27.5 years, even while it is (we hope) increasing in value.

So where will your poverty-stricken son or daughter get the money to pay you market rent for the condo? The same place he or she would get the cash to pay for a dorm room or an apartment rented from some third party. In other words, from you! You can give your kid up to $13,000 annually without any adverse federal tax consequences. If you’re married, you and your spouse can together give up to $26,000. Your child can use that money to write you monthly rent checks. Just make sure he or she actually sends the checks and make sure they say they are for rent. Also, it’s best if you open up a separate checking account to handle the rental income and expenses. Taking these simple steps will help keep the IRS off your back if you ever get audited.
Passive loss rules may postpone tax losses

If the condo throws off annual tax losses (which it probably will after counting depreciation deductions), the passive activity loss (PAL) rules generally apply. The fundamental PAL concept goes like this: you can only deduct passive losses to the extent you have passive income from other sources -like positive taxable income from other rental properties you own or gains from selling them. Fortunately, a special exception says you can deduct up to $25,000 of annual passive losses from rental real estate provided: (1) your annual adjusted gross income (before the real estate loss) is under $100,000 and (2) you “actively participate” in the rental activity. Active participation means being energetic enough to at least make management decisions like approving tenants, signing leases, and authorizing repairs. You don’t have to mop the floor or snake out the drains.

If you qualify for this exception, you won’t need any passive income from other sources to claim a deductible rental loss of up to $25,000 annually (your loss probably won’t be that big). Unfortunately, however, if your adjusted gross income (AGI) is between $100,000 and $150,000, the special exception gets proportionately phased out. So at AGI of $125,000, you can deduct no more than $12,500 of passive rental real estate losses each year (half the normal $25,000 maximum). If your AGI exceeds $150,000 and you have no passive income, you can’t currently deduct any rental real estate losses. However, any disallowed losses are carried forward to future tax years, and you’ll be able deduct them when you sell the college condo. All in all, this is not a bad tax outcome–as long as your losses are mostly of the “paper” variety from noncash depreciation write-offs.
Favorable tax rules when you sell

When you sell rental real estate that you’ve owned for over a year, the profit—the difference between sales proceeds and the tax basis of the property after subtracting depreciation—is long-term capital gain. However, part of the gain—the amount equal to your cumulative depreciation write-offs—can be taxed at a maximum federal rate of 25%. The rest of the gain will be taxed at a maximum federal rate of no more than 15% under the current rules (which I hope will be extended to post-2012 years).

Remember those carryover passive losses that we talked about earlier? You get to use them to offset any gain from selling the condo.