I have a tenate in a house that I have a trust on, He wants to be able to file for a Homestead and use the taxes as a write off. How can I set this up so that it is a win win situation.
Howdy Beaner:
I have seen taxing authorities give the tenant/buyer homestead exemptions on a contract for deed ownership. A lease option will not have that effect. You could also just give them the deed and carry back the financing also. Texas does not like contracts for deed. Check your state laws too
The criteria for the IRS to allow deduction on Federal taxes is that they live in the house as their primary residence, they are contractually obligated to incur the burdens of ownership(repair, taxes, insurance) and if they do not own it that they own are a beneficiary of the trust that owns the house.
Likewise, the local tax districts allow the deduction if it is recorded and the owner provides a letter of approval.
The problem becomes when you give them this right you are probablely giving them the right to file for protection under bankruptcy or other legal proceedings like divorce.
On the homestead deduction I prefer not to give them that lattitude. I am perfectly willing to allow them the federal deduction for interest.