Buying house for son to occupy

What is the name of your state (only U.S. law)? PA

My husband and I are looking to purchase a small starter home that our son will occupy. The plan was to rent it to him for the amount of the mortgage payment, but I'm wondering about the tax / legal considerations involved with doing this, or if perhaps there's a better way to go about this.

We want to be the owners though we may sell the home to him somewhere down the road if he decides he wants to do that. Otherwise we would probably keep the house & rent it out, or if the market conditions were such that we could make a profit, we might sell it.

What can we do to minimize our tax liabilities in this situation? What can we expect with the mortgage process? Any other 'gotchyas' we should be aware of?

Thank you for your help!

If you are charging him the market rent (which you sound like you'll be close enough to), then you can just treat as if you were a landlord in any other form. You report his payments on schedule E and you deduct the interest and property tax (and any expense in maintaining the property). You'll also need to take the depreciation deduction. Note the principal payments themselves are not deductible. Of course, you'll recapture that depreciation when you sell.

The issue with lenders is that rental property is handled differently from owner-occupied properties. Do not lie and tell them you will live in this home if you will not.