Buying Property for Your Kids to Live in During College

Here's another income-splitting/real estate combination that some parents have found a valuable help in paying for a child's college education. They pull together the down payment for a house or condo in the college town. The child gets a roommate or two and they all pay rent to the parents, who report it as income but also get to deduct mortgage interest, property taxes, and depreciation.

The parents also hire their child to manage the apartment - finding tenants, collecting rents, taking care of maintenance, and repairs. What they pay him or her is deductible from the rental income. If the rental property shows a loss, and if the parents qualify for the $25,000 exception to the passive-loss rules, that loss can shelter other income. Any profit when the home is sold after graduation is an added sweetener.

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