If you simply bought the condo and gave it to her, then she'd be liable for gift taxes, which would probably be a pretty heavy hit to her.

As far as co-signing, it depends on who is actually making the payments. If she is, then there's no problem with gift tax and she might even be able to take an interest deduction. However, I would imagine she's in a lower tax bracket, so her savings might be negligible.

If you make the payments, then she might be liable for gift tax, depending on whether your payments for the year would exceed 11K per year, the ceiling on what you're legally entitled to give her without triggering the tax. Of course, you'd then be able to deduct the interest payments, which would probably be more of a benefit to her than to you.

As far as capital gains goes, if it's her main residence and she sold it at a profit, no CGT would be due. If you were to buy it and eventually sell at a profit, than you would have to pay CGT.

As for whether it's a wise decision to help her this way, that depends on a lot of factors, including her personal character and level of maturity. You'll probably get some other posters on here who will be very firm that children should always make their own way, that they won't become responsible if you make things too easy for them, etc.

Personally, I don't buy that line. Some financial help to people when they're just starting out is usually much more valuable to them then waiting to inherit a bundle when they're getting old themselves. But, of course, a lot depends on one's personal philosophy.

This all assume that you and DH are finacially secure enough to do this without making any real sacrifices.

I am confused by feedingfrenzy's post since s/he doesn't seem to understand how the gift tax works. Gift taxes are the responsibility of the giver, not the receiver. You buying the condo and then giving the title to your daughter is the only scenario that would bring up the gift tax and the condo would have to be paid off because no mortgage company would allow title to transfer to someone not on the mortgage loan.

But your question was about co-signing a mortgage. I will also assume that you will also be on the title of the condo. The tax consequenses, as far as I know and I'm not an expert, are:
1) mortgage tax deduction is only available to the person who pays it AND is responsible for the mortgage AND only applies to what you actually pay. You have to be on the mortgage in order to deduct. If your daughter pays half and you pay half, then you can only deduct your half from your taxes if you pay. Since she is still in school I am assuming she doesn't have enought deductions to itemize. If you pay the whole mortgage payment, then you get the whole amount to deduct.

2) when the condo is sold and if your daughter has lived there for at least two years, she will have a $250,000 exemption before she owes any capital gains taxes on her half. If you don't live there also, you will owe capital gains on all of your proceeds.

Of course, its always wise to seek out a tax professional and get his/her advice instead of relying on internet advice from people you don't know.

clemrick is right of course that the gift tax is paid by the giver. Sorry for the laspe. But I think that the OP paying the mortgage for a condo owned by the daughter would trigger it as well.

Consultation with a tax professional would be very wise.

Do you want to tie your credit to hers? Even us awesome college students can get into crazy credit debt after college! I think you should just buy the condo and let her live in it. You can always sell it to her down the road but most likely she'll want to leave the college town she's in and you can then sell it or use it as a rental/income property.

We co-signed for our daughter. There was never a problem and 12 years later she moved and paid it off. She took the deduction because we made no payments.

It isn't true that the mortgage holder won't allow someone's name on the deed if it is not on the mortgage. My other daughter is on our deed and the mortgage is in our name only.

I live in a college town and work here as a realtor. There are many parents that find it's less expensive, especially with the low mortgage rates the past few years, to purchase a condo or small house compared to rent because the interest is tax deductible. If your daughter has a roommate or two that helps even more. You might want to search "kiddie condo loan." The student and parent's names are both on the application and the deed. It's an FHA program specifically for this situation. Any condo or PUD must be on the approved list for the program though. Also several mortgage brokers have emailed me over the past couple of weeks that PMI will be tax deductible in 2007 on loans closed in 2007. The PMI is what has pushed many people away from FHA loans. I'm not an accountant so won't try to answer questions about gift taxes or the long term implications. Overall I think it's a great idea for many looking to perhaps make a bit of money over the long run instead of paying rent. (As I wrote that I realized that just because most people can own property for a short time (less than 5 years) in my college town doesn't mean it will be the case everywhere.

Here is a link that might be useful: Kiddie condo loan

You cannot write off the mortgage interested becasue it is not your primary residence. HOWEVER, if you rent the condo to your daughter you can write off the taxes if you consider it an investment property. Talk to your accountant about how that all works, but collecting a nominal rent it the way that it would likely benefit you both the most.

pebbles--it's always a good idea to have your facts straight.

Interest on a second home IS deductible..

Check out the first paragraph under Qualified Home in the link below

Here is a link that might be useful: IRS home mortgage deduction

rrah -
We are not allowed to write off our second home mortgage,but reading this it seems that it's actually another reason why we cannot write it off rather than the fact that it's a second home. Thanks so much for posting this.