Homeowners who provide free accommodation to their child is a fairly common practice. There are nevertheless regulations and devices to know and not to neglect, both on the family and tax side. Here are some practical tips to consider before renting a home to your child...
Free rent: consequences and fiscal regulations
Before renting free housing to your child, it is advisable to draft a lease contract. The purpose of this document is to protect the parents and the beneficiary child of the accommodation free of charge. Indeed, the drafting of a lease agreement clarifies the situation and avoids misunderstandings or potential disputes with the administration or with the family. This document must mention the coordinates of the two parts, the description of the property, the duration of the lease and in annex the inventory of fixtures.
The lessor owner (in this case the parents) thus retains the possibility of terminating the lease within a legal period of 3 months for an empty rented house (or 1 month for a rented furnished flat), as for any tenant. As for the child, he can justify an address for all his administrative letters.
Attention, if the housing is rented free of charge, it is very important to know that the expenses are not deductible at the tax declaration (printed No. 2044), in this case the property tax, the interests of borrowing and work performed (as maintenance or repair). In return, no tax will be payable by the lessor since there is no rent payment (in accordance with Article 15 of the General Tax Code).
Impact on the estate
Renting free housing for your child also has impacts on the estate. It must be taken into account that this "loan" can be considered as a donation to the extent that the child who benefits from housing makes savings on rent. This donation can be likened to a part of his inheritance. In the event of the death of the parents, the other heirs are entitled to request that the value of this donation be deducted from his share of the inheritance.
To overcome this type of situation, it is necessary to specify in writing (via the will in particular) that the donation will be added to the inheritance and that the child having enjoyed the housing can claim the succession in the same way as the other heirs.