<p>Do not buy a house together. Do not try to come up with an arrangement for sharing the equity appreciation, if any. Figure out what’s fair, and pay that.</p>
<p>The proper tax treatment of rent is going to make your heads spin. Yes, it’s income to her, and she will have to depreciate some part of the house and its contents. Then, when she sells the house she will have to recover the depreciation, some at ordinary income rates and some at blended rates, and she won’t be able to roll over her gain on that portion of the house (unless you had moved out and not been replaced for some period of time).</p>
<p>I agree it will make your heads spin. We rented an accessory apartment in our family home off and on for a couple of decades and I could never have figured the tax implications out on my own. We had to pay a lot of money when we sold the house because of those implications. Really, really complicated.</p>
<p>If you pay her rent in cash, you won’t have the records you need to show for renting or buying in your new locale.</p>
<p>I know couples who have ended up, because of employment opportunities, living in different areas of the country. In those circumstances, it seems to me it makes sense for each to own their own residence, unless you are married, and maybe even if you are married.</p>
<p>Can she afford to buy and pay the mortgage on this house without a tenant?</p>
<p>edit: If you were my child, I would advise paying for expert professional advice in this scenario.</p>
<p>edit 2: My own kids are getting to the thinking-about & possibly-house-buying stage of life. They have pretty much decided it won’t make sense until they know they are where they can count on being for the foreseeable future. I am definitely not an expert on real estate or anything else, but that seems sensible to me.</p>
<p>I have a job offer that’s too good to refuse out here for when I finish my PhD, and she has a great retirement plan that kicks in after 10 years (now down to 7). After she gets vested in her company our plan is to start looking out east. </p>
<p>She can afford the mortgage without a tenant without much of an issue. Will it pretty much wind up being best if she pays for the mortgage, and I cover all other expenses (car, utilities, maintenance, repairs, food, etc)?</p>
<p>If she buys the house on her own, and we were to marry at some point in the future (our basic plan is not to do marriage until kids), what happens to ownership of the house? I know CA is a community property state, so do I wind up with half ownership? When we go to resell the house, would the tax benefit be only for her, or could we extend it to the two of us?</p>
<p>My experience in CA was that every time the house was re-titled, it was officially reappraised. In FL, I could shift from my name to my Trust fund, with no reappraisal. Personally, if you marry in a few years, it may be worth paying additional tax ( as properties going up not down). </p>
<p>Biggest question is, if you plan to move in less than 5 years, is buying worth it? PLEase talk to those people on CC who are knowledgeable in this area.</p>
<p>Right now we’re renting a 1BR in an apartment complex that’s going downhill for $1200 (with rents soon to rise). We can only have one parking spot, and once I finish my PhD we’ll need a second, so I can drive to work. I currently walk or bike in. If we want to get an apartment in the areas we like it’s going to be approximately $1600 a month in rent. Mortgage for the house we bid on will be approximately what rent is going to cost for a small 2BR apartment. Even if financially it winds up not necessarily being the best move we both feel for personal happiness getting some detached walls would be nice. Rent on houses my friends are in is considerably higher than our payments.</p>
<p>No real plans to move in less than 5 years. She works downtown and feels the commute from our general neighborhood is the best of all possible alternatives. Kids aren’t on the horizon for a few years, either, so we aren’t worrying much about trying to get into the best school districts (San Marino and La Canada are well outside of our price range at the moment, anyway).</p>
<p>In a community prop. state. If you get married after the house was bought in one’s name, you would have a 50% interest in the house. Obviously, you will enjoy tax benefits from the mortgage payments after you are married. In all aspect, you would have 50% of everything related to the house, including the larger capital gain exclusion when you sell it.</p>
<p>IMHO, in OP’s case, your girl friend should buy the house in her name, it is a much cleaner deal, just in case you break up afterwards. Regarding to the tax benefits, consider that as a birthday gift to your GF. :)</p>
<p>“Do not buy a house together. Do not try to come up with an arrangement for sharing the equity appreciation, if any. Figure out what’s fair, and pay that.”</p>
<p>Definitely.</p>
<p>As far as, “If I pay her rent would she be responsible for paying taxes on the rent as income? Also, would it seem reasonable (or possible) for us to put in our agreement that I should get some sort return for all the rent I paid her and/or the increase in the house’s value I helped subsidized?”</p>
<p>Forget her declaring taxes on what you give her, really, does the govt have to get a share of everything? Just give her a fair amount towards “household expenses” and forget the rest of it. There is the chance the house will decrease in value also, would you plan on paying her money for that decrease if you broke up? Maybe you shouldn’t be paying a full 50% towards the house, I’m sure you guys can figure out what is fair.</p>
<p>I don’t think that’s right. My understanding is that in California and other community property states, property acquired by either spouse before the marriage is considered separate property, not community property. Community property is property acquired out of the earnings of either spouse during the marriage. So marriage wouldn’t automatically give you a 50% interest in a house that your spouse already owned. Perhaps some Californians, or lawyers, or California lawyers, could elaborate on my rudimentary understanding of this topic.</p>
<p>Agree with bc…house is separate property if it was brought into the marriage. The trick is to keep it completely separate going forward…if payments for the mortgage, repairs, etc. Come from a community account, for example, then the house could become separate/community property. Very messy…</p>
<p>In your situation, I wouldn’t want to own property with anyone unless I were married to that person.</p>
<p>I stand corrected. I should qualify my statement as follows:</p>
<p>Property acquired before the marriage is Non-marital assets. Property acquired with separate funds. Property acquired by gift, bequest or devise, can all be separate. Those things can become marital if you treat them as community assets. For instance, buy a house before the marriage but then pay the mortgage with wages earned during the marriage and the house can become community property.</p>
No. He’ll just need to show where he lived and give a landlord’s reference. He does not need to show proof of payments, or even how much he paid. Giving the reference of living with GF should be sufficient; GF can give a reference that he paid towards household expenses.</p>
<p>Technically, homeowner will have to pay taxes on a tenant’s rent. However, if the “tenant” and “landlord” are living as a domestic couple/partnership, and splitting household expenses, it shouldn’t technically be income. It’s different when there is a relationship than when someone’s merely renting a room. Nor does the IRS even inquire in such situations.</p>
<p>Interesting discussion, only because my wife and I bought our first house together before we were married, in California, in 1981. I can’t remember how we had the title done.</p>
<p>Alh, I have moved so many times in my life and I have never, ever had to show anyone proof of rent paid. Maybe write down prior address or landlord’s phone number, but the credit report reveals all.</p>
It is actually very unusual to have rental history show on your credit report. You should definitely keep track of your previous landlord’s contact info so they can provide a reference for you. That is the proof.</p>