Shows CPA presentation of using real estate for college and how deductions apply.

1. Co-ownership and Shared Equity arrangements The Zero College Debt Program™

6. Example 1: 50-50 ownership Example used for illustration only Home shared with renters @ $400 each *3= $1,200/mo Depreciation based on $160,000 improvements/27.5 yrs=$5,842.40/yr *.75 Income shared by parents and student, reflected in Taxes. Purchase home $200,000 Combined amounts Child’s share if 50% ownership Parent’s share if 50% ownership Purchase Price $200,000.00 $100,000.00 $100,000.00 Down payment 10% $ 20,000.00 $ 10,000.00 $ 10,000.00 Mortgage Loan 90% $180,000.00 $ 90,000.00 $ 90,000.00 Mortgage Payment (PITI) $ 1,373.86 $ 686.93 $ 686.93 Actual collected rent $ 1,200.00 $ 600.00 $ 600.00 Total mo. out of pocket cost $ 173.86 $ 86.93 $ 86.93 Note:

7. Example 1: 50/50 ownership Purchase home $200,000 Combined amounts Child’s share if 50% ownership Parent’s share if 50% ownership Less Tax Deductions: Yearly Interest on mortgage $10,740.00 $5,370.00 $5,370.00 Taxes on property $2,000.04 $1,000.02 $1,000.02 Insurance on property $600.00 $300.00 $300.00 PMI $936.00 $468.00 $468.00 Repairs $1,200.00 $0.00 $1,200.00 Miscellaneous $800.00 $0.00 $800.00 Depreciation -student can only claim 75% depreciation of 50% $5,842.40 $2,190.90 $2,921.20 Total Tax Deductions $22,118.44 $9,328.92 $12,059.22 Minus rent collected -$7,200.00 -$7,200.00 Estimated Annual Deductions $2,128.92 $4,859.22

8. Example 2: 10% Parent Ownership Example used for illustration only Home shared with renters @ $400 each *3= $1,200/mo Depreciation based on $160,000 improvements/27.5 yrs=$5,842.40/yr Purchase home $200,000 Combined amounts Child’s share if 90% ownership Parent’s share if 10% ownership Purchase Price $200,000.00 $180,000.00 $ 20,000.00 Down payment 10% $ 20,000.00 $ 18,000.00 $ 2,000.00 Mortgage Loan 90% $180,000.00 $ 162,000.00 $ 18,000.00 Mortgage Payment (PITI) $ 1,373.86 $ 1,236.47 $ 137.39 Actual collected rent $ 1,200.00 $ 1,080.00 $ 120.00 Total mo. out of pocket cost $ 173.86 $ 156.47 $ 17.39

9. Example 2: 10% Parent Ownership Purchase home $200,000 Combined amounts Student’s share if 90% ownership Parent’s share if 10% ownership Less Tax Deductions: Yearly Interest on mortgage $10,740.00 $9,666.00 $1,074.00 Taxes on property $ 2,000.04 $1,800.04 $ 200.00 Insurance on property $ 600.00 $ 540.00 $ 60.00 PMI $ 936.00 $ 842.40 $ 93.60 Repairs $ 1,200.00 $ 0.00 $1,200.00 Miscellaneous $ 800.00 $ 0.00 $ 800.00 Depreciation (student can only take 75% of 90%) $5,842.40 $3,943.62 $ 584.24 Total Tax Deductions $20,657.84 $16,792.06 $4,011.84 Minus rent collected -$14,400.00 -$12,960.00 -$1,440.00 Estimated Annual Deductions $ 6,257.84 $3,832.06 $2,571.84

11. Example 3: 100% student owner Example used for illustration only The parents are the co-signor on the loan and own no part of the property for tax purposes . Student takes in renters (if 4 BR, take in 3 renters and generate an income).Est. $400/renter Purchase home $200,000 Tax implications Purchase Price $200,000.00 Down payment 10% $ 20,000.00 Mortgage Loan 90% $180,000.00 Mortgage Payment (PITI) $ 1,373.86 Actual rent $ 1,200.00 $400*3 = $1200 Income Total mo. out of pocket cost $ 173.86 Depreciation $5,842.40/yr est.$160,000/27.5 *.75 =$4,381.80

12. Example 3: 100% student owner Purchase home $200,000 Total expenses and deductions Allowed Deductions Tax implications Less Tax Deductions: Yearly Interest on mortgage $10,740.00 $10,740.00 Deductible Taxes on property $ 2,000.04 $2,000.04 Deductible Insurance on property $ 600.00 .75 * 600 = $450.00 Proportional deduction PMI $ 936.00 $936.00 May be deductible Repairs $ 1,200.00 .75*1200= $900.00 Proportional deduction Miscellaneous $ 800.00 .75*800= $600.00 Proportional deduction Depreciation@ 75%-student cannot depreciate portion they use. $5,842.40 $4,381.80 Proportional deduction Minus Rents -$14,400.00 - $14,400.00 Income Estimated Annual Deductions $ 7,718.44 $5,607.84