Parents of college students may want to buy a large apartment or a house near the campus. Your own student can live there, saving you dorm fees, while you rent to one or more other students. Your costs–everything from heating bills to property maintenance–will be deductible because you’ll have income-producing property.
You can name your child as property manager, responsible for screening tenants, getting leases signed, collecting rents, arranging for property maintenance, etc. For those services, you could pay your child a management fee of, say, 10 percent of the rental income received from tenants.
Such management fees will be deductible for you, the property owner, while they probably will be tax-free to your child. In 2007, single taxpayers may have up to $5,350 in earned income and owe no tax, because of the standard deduction. Thus, you not only will save dorm fees with this strategy, you also will have a tax-effective method of providing spending money to your college student.
