Well the short answer is ‘usually they can’t.’ But there are some simple tax planning tools I first learned from my dad.
A tool I’ve set up for many to make the high costs associated w/ future/current college costs deductible is nice little managed rental homes. Consider this:
Our company will:
- find the properties – give the data – for you to make an informed investment
- broker the sale(s)
- oversee/manage the pre-rental rehab
- screen/manage tenants
- send monthly statement and direct deposit earnings.
While you, the taxpayer:
- have child(ren) care for lawn and any tasks they can handle – this is deductible exp to parent, comparatively minimal tax effect up to $4000 for child.
- gets to now deduct many things that have or will be paid for anyway – tools already owned: mowers, trailers, mileage at $56c/mile, childs cell phone & computer to extent used to help care for property(ies), etc.
- deducts depreciation – another not out of pocket ‘tax preference item’ as the IRS calls it.
- deducts house office area used for tracking & managing the manager – so now a % of house costs are deducted that again are already being paid for.
If the property is in the college town:
- child deducts mileage to/from and many other costs for him/her to ‘site manage’ it as an occupant or near by resident.