Discussion:Unmarried Couples - Itemized Deductions?
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Discussion Forum Index --> Tax Questions --> Unmarried Couples - Itemized Deductions?
| 24 February 2006 | |
| I have two clients who have been living together for a number of years and bought a house in the prior year. Because of her credit scores, only her fiance is on title and the loan.
They both paid for the mortgage interest, insurance, and property tax jointly. Are they allowed to split the mortgage interest and property tax on their separate returns for itemized deductions? I seem to recall reading somewhere that she needed to be on title and liable for the loan to split the deduction - but in the reality of the situation, she truly is paying 1/2 of the mortgage. | |
| 25 February 2006 | |
| Ok, so i've read publication 936, and that pretty clearly states that only the person liable for the loan can deduct the mortgage interest. So since she is not on the loan, she cannot deduct the mortgage interest.
But what about the property tax? I have come fo find that she is on title, so she does have rights to the house. Based on what i've read, you can deduct property tax if you paid them on behalf of a property that you own. So would it be reasonable to deduct the 1/2 of the property taxes that she paid? | |
| 25 February 2006 | |
| Since the expenses are being paid out of a joint account, its really not possible to prove how much each is paying. About the closest you can come is to allocate the funds being provided by each person to the account. To be assured of being allowed to deduct what each actually pays, in the future separate checking accounts should be used to pay the expenses. | |
| 26 February 2006 | |
| Under Regulation ยง 1.163-1(b), you are considered to be legally liable for the debt on mortgaged property if you are either the legal or equitable owner of the property (even though your name is not on the mortgage note). In this case, one co-owner is a legal and equitable owner and the other owner is merely an equitable owner. Each co-owner may deduct the share of interest that he actually pays. | |
