Why you should pay your parents' rent

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HRA and rent

It is a fairly well-known fact that employees can claim tax advantages under the House Rent Allowance (HRA) portion of their wages.

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HRA asserts

Employees may deduct the lesser of the actual rent paid, basic pay less 10% of the rent paid, or 50% of their wage.

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paying parents' rent

While the majority of us are aware of HRA benefits,

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some employees might not be aware that they can pay for their parents' rent and deduct it from their paychecks.

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ways to pay

You must pay your parents' rent by check or wire transfer if you want to claim the HRA deduction.

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Remember this.

To be eligible for the benefit, you must be the only owner of the property and not a co-owner or other owner.

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Agreement for Rent

In order to claim a deduction, you must also agree to pay rent to your parents and get rent receipts from them each month.

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Parents are subject to tax

You should also be aware that your parents will be required to pay income tax on the rent

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you pay under the heading of "income from residential property."

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Deduction for parents

However, in addition to being able to deduct property taxes, your parents are also entitled to a 30% standard deduction on their rental income.

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Will this work?

Following this strategy frequently results in tax savings for the entire family.

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