Homes purchased by parents for their children
All parents wish to give their children the best possible start in life – also when they fly the nest. Unfortunately, it often turns out to be difficult for young people to find suitable accommodation – particularly in the major university cities. A solution might then be for their parents to purchase an apartment to be rented to their children. Apart from the security of giving your child a safe home, there may also be tax advantages for you as parents.
Although such purchase might often be a really good solution for the entire family, you need to be aware of a few things before buying:
- The rent must not be significantly lower than the market rent, meaning that your child has to pay a rent, approx. corresponding to the rent that you would otherwise have collected from a third party;
- your child is entitled to rent allowance under the current rules;
- do not give your child exemption from rent as a gift; even if this might sound as a good idea, you might end up being subject to taxation;
- you must opt for the preferred tax model, meaning that you have a choice between taxation according to the business tax scheme or return on capital scheme;
- you are entitled to sell the property to your child with the deduction of a discount of up to 15% below the official valuation – your child may then resell tax-free to a third party, provided your child has been living in the apartment during the period of ownership.
HjulmandKaptain provides advice to many young people and their parents every year concerning parents’ purchases of homes for their children. We know the rules and can help you with the negotiations. Do not ever forget that the real estate agent shall attend to the seller’s interest.
If you have any questions regarding the above, please feel free to contact us on telephone +45 7015 1000 or e-mail to: mail@70151000.dk
