Imagine your reaction to the following scene: You return home from work one night to find your teenage daughter
running gleefully about with a letter in her hand. When you calm her down, she tells you that she has just been
accepted to the incoming freshman class of a highly regarded private college. After she tells you that the tuition,
along with room and board, is $40,000 a year, you wonder, “So, what’s the good news?”
Many parents may be in for “sticker shock” when they have to confront the cost of a four-year private college
degree. Graduate school often carries an even more staggering price tag. While growth in the cost of higher
education has slowed in recent years, tuition and fees continue to outpace inflation. Couple the high cost of college
with the other financial pressures on families these days, and you have a prescription for some serious financial soul
Although parents and students can avail themselves of a wide variety of scholarship programs, loan packages, and
work-study arrangements, there are even more creative ways to hold down college costs. While not applicable to
every situation, ask yourself whether either of the following ideas might benefit your family:
Cost Cutter #1—The Student Condo: Under this arrangement, Mom and Dad purchase a condominium for
their child. Although a student condo is not purchased for its tax advantages (however, check with your tax
professional about the possibility of deducting the mortgage interest) parents can expect that their child may have
quieter-than-average housing, free from many of the distractions of college dorm life.
With room and board charges at an all-time high, this option may not be as farfetched as it first seems. The student
condo may be an interesting solution to those who hold an optimistic view of real estate values a few years down
the road, especially if more than one child can use the condo while attending a school in the same area.
Cost Cutter #2—The Student “Condo-dorm”:
The “condo-dorm” allows Mom and Dad to hire their child as the student-manager of a property they purchase for
both its tax and non-tax advantages. The idea is to have the student find tenants, collect rents, and manage the
property. Mom and Dad can even pay a salary to their student for services rendered as resident property manager.
The salary could, in the absence of other taxable income, be below the student’s filing threshold for income tax
Since the parents are entrusting their child with some serious responsibilities, the condo-dorm carries some
significant liabilities that may not make it suitable for undergraduate students. Condo-dorms may make better sense
for mature, graduate students.
While these solutions to college sticker shock are a little off the beaten path, they offer enterprising parents and their
children an opportunity to use real estate to their advantage. If this appeals to you, you should seek tax and legal
advice before proceeding.
The opinions voiced in this material are for general information only and are not intended to provide specific advice
or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you
discuss your specific situation with a qualified tax or legal advisor.
This article was prepared by Liberty Publishing, Inc.
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