Discussion:Mortgage & Taxes - Who can claim the deductions?
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Discussion Forum Index --> Tax Questions --> Mortgage & Taxes - Who can claim the deductions?
| 11 April 2007 | |
| Client originally wanted to deduct interest and taxes (paid through escrow) paid BY the client on their adult son's home. Both client and son's name are on the 1098, but son is listed as primary and uses his SSN.
I know either party can take the deductions, however, are there rules about WHO actally makes the payments? In 2006 ALL payments of mortgage and tax were made by client. Client wants the son to have the deductions this year since he will also have a home office for his contracting business, which will have a greater tax benefit since it will offset Schedule C income for the son. Client would only benefit on schedule A and they are both in the same tax bracket. Can they "mix and match" deductions any way they feel like it, or is it the party who PAYS the expenses who actually MUST claim the expenses? FYI -- the principal, interest, taxes, and insurance are under $12,000 for 2006. Would it simply be considered a "gift" from client to son for any tax years that client makes payments and wants to give the deductions to the son? Thanks. | |
| 11 April 2007 | |
| Randy, do a search using the term "beneficial owner" and another search using "beneficial interest" in quotes
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| 11 April 2007 | |
| Wow - that looks like a daunting list that results from the search!
Illini - I believe the key is who is liable for the debt, rather than who pays for it. Your gift analogy is how I think of it as well. However, I'm sure the IRC Code list has a much more valid answer. | |
| 11 April 2007 | |
| Equitable or Beneficial Ownership. I don't see beneficial ownership applying in your case. Nevertheless, see discussions at the bottom of the article. | |
| 11 April 2007 | |
| Solomon, could you be more specific about WHY "I don't see beneficial ownership applying in your case"?
That might shed some light on how I am to proceed. Thanks. | |
| 11 April 2007 | |
| Are you questioning the issue of a debtor-creditor relationship?
Why can't this just be a gift from client to son and son uses gift to pay the interest and taxes? | |
| 11 April 2007 | |
| Perhaps I am incorrect, but your client does not live in the house and maintain the upkeep and what not. I believe these deductions go to the legal or beneficial owner and as I understand it, your client and son are both legal owners - right? If both are legal owners, the beneficial ownership does not apply as I understand it. Because your client is paying the mortgage and taxes I don't see how that entitles his son to the deduction. | |
| 11 April 2007 | |
| thanks -- I've already adjusted my client by taking the deductions off. The son is going to another tax preparer, so now it's no longer my problem. | |
| 11 April 2007 | |
| Only the parents may claim the deductions this year since they made all of the payments. | |
