Discussion:Itemized deductions for someone that is not listed on 1098
From TaxAlmanac
Discussion Forum Index --> Advanced Tax Questions --> Itemized deductions for someone that is not listed on 1098
Discussion Forum Index --> Tax Questions --> Itemized deductions for someone that is not listed on 1098
| 30 July 2008 | |
| AARRGGHH:
Who knows what to believe here? Client states he is married...but I have no clue if they are or not. 1098's and Property taxes are in the name of the "spouse", different last name. Client is asserting that they file separately (DUHHHH) but that he should be entitled to the deduction as she has no income and he has the majority of the income for several years. If I believe the client, then I will take the interest but in this case, it may be a scam to see what you can file as itemized. As this client is in deep trouble I am a bit fearful of taking high mortgage interest, etc. without my client's name on the 1098. He states he is personally responsible, but the 1098 is in her name, so what to do???? He makes the payments, but is he the equitable owner of the property or not? What would you do? She will lose the deduction due to her income and he benefits from the deduction, but who knows? | |
| 30 July 2008 | |
| The better question is - why not file jointly? It eliminates the issue and he gets to use her exemption. There could be a good reason for it. Often it is because the taxpayer is self-employed and not make ES payments. | |
| 30 July 2008 | |
| Agree with IRSfixer on the first question to ask. Before you go down the equtiable ownership route ask if he is on the title. The 1098 will often only list the first name on the title. He might be on the title.
Also remember if he itemizes she is forced to do so. | |
| 30 July 2008 | |
| If they are filing separately, this is good sign that he might not be an equitable owner. However, I seem to recall that you practice in a community property jurisdiction (Washington), and without researching WA law, I would venture to say that he probably does have an equitable interest in the property. | |
| 30 July 2008 | |
| Depending on whether the state is community property or not...whether he paid the bills doesn't matter if they are not in his name he can't take the expenses. She may have owned the property prior to the marriage..unless she puts him on the deed and instructs the mortgage company in writing to issue the 1098 in both SSN's it isn't his deduction.taxea | |
| 30 July 2008 | |
| P.S. in situations like this my motto is "don't believe anything you haven't verified through documentation" taxea | |
| 30 July 2008 | |
| They have filed separately for years to prevent her from being dragged into the IRS "net" due to innocent spouse I believe.
Now client is insisting the 1040's are filed and he get the itemization. When I looked at the 1098's...high mortgage interest; think it might even be too high to be deductible on personal level but with filing separately, he wants to take the deductions since he is the owner of a business and she will file but will owe zero taxes due to her income level.... | |
| 30 July 2008 | |
| And I am in FL; no community property state. Never the less, I agree with Taxea....seems like he is trying to take a deduction for things he is not entitled to whether he makes the payments or not is inconsequential.
He is NOT GOING TO BE HAPPY WITH MY ANSWER HOWEVER...... | |
| 31 July 2008 | |
| Sandysea, sorry - I now remember that you are in Florida.
Taxea, you might want to read Reg. ยง 1.163-1(b). For mortgaged real estate, in order to deduct mortgage interest, it is not necessary for the taxpayer to be on title, and it is not necessary for the taxpayer to be listed on the mortgage note -- as long as he is an equitable owner. | |
| 31 July 2008 | |
| I agree Riley2 Iwas only suggesting that a letter to the mortgage company requesting both SSN on the 1098 would allow him the deduction
but in this case...they have "always" filed separate returns and she has a different last name which leads me to: Did she own the property before they married? Are they legally married? Is this a new client? if so, I would be very careful of taking him at his word.taxea | |
| 31 July 2008 | |
| The equitable owner is the place that I am getting a bit confused with. If he makes all the payments due to her not working and they are legally married, he told me today that he was not on the deed to the home so that he had no personal assets to be levied.
In 2006 they refinanced and he is on the mortgage but still not the deed. Since he has sheltered himself from ownership in the home for sake of saving assets, then I would assume he is not an equitable owner but of course the interest is lost as a deduction in any shape or form. Yes, new client and who the heck knows if this is truthful or not? | |
Death&Taxes (talk|edits) said: | 31 July 2008 |
| I hate to tell anyone this, but her having a different name means diddly without more facts. I just counted 31 couples who file with different names in my database, and my dear wife does not use my name.
I don't see how he would not be an equitable owner if he is now on the mortgage. | |
| 31 July 2008 | |
| But for 2005....in 2006 he was the owner as he was on the mortgage but not the deed. In 2005 he was neither but he is stating that due to paying all the bills, he felt in the event of a divorce he would be entitled to "equity" in the home.
I know in 06 and 07 I will take the deduction, but in 05 we are talking about a huge difference in whether he takes it or not. | |
| 31 July 2008 | |
| Are they filing MFS or single? Two single people can purchase a residence.
But you have to know who owns the proerty. The expense can be split between them. Include a statement to that effect that each are 50% owners. List name ssn and amt of expense that each person is taking. Include it with each tax return so it's cross referenced. | |
| 31 July 2008 | |
| If he is on the mortgage he is legally responsible for the debt, and the argument can be made that if she does not have the ability to pay the mortgage and he pays it to prevent foreclosure that he is protecting his interest. I don't know if that rises to the level of having an equitable interest in the house, but my guess is that it does, because he stands to lose if the house is damaged or the mortgage isn't paid.
DavidH | |
| 1 August 2008 | |
| For mortgaged real estate, the person claiming the interest deduction does not need to be on title; nor does he need to be listed on the mortgage loan as long as he is either a legal owner or an equitable owner. | |
