Discussion:Mortgage Interest/Living Together

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Discussion Forum Index --> Tax Questions --> Mortgage Interest/Living Together


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Swortmann (talk|edits) said:

3 January 2006
Can someone point me to some guidance on how to properly account for itemized deduction, i.e. real estate taxes and mortgage interest when a couple live together......Thanks

Anuenue (talk|edits) said:

3 January 2006
Are both parties on the loan? If they are, by letter, ask the mortgage company to put both SSN's on the 1098...the percentage of deduction can then be split as needed on the tax return.

If not, the 1098 will show the SSN of the party on the loan...this is the only one that can take the deduction anuenue

RLMCPA (talk|edits) said:

3 January 2006
Mortgage interest does not have to be in both party names. An "equitable owner" works too. See Saffet Uslu, et ux., TC Memo 1997-551. Interest paid on the taxpayer's indirect debt obligation combined with equitable and beneficial ownership of the residence may be deductible (Uslu). Here, taxpayers were unable to obtain a mortgage due to their poor credit rating. A related party obtained a mortgage and held title to the taxpayer's home. The taxpayer made all the mortgage payments and bore all economic responsibilities of owning the home, which was the primary residence.

However, real estate taxes do require that each be legally obligated to pay the tax. Real estate taxes generally can be deducted only by the taxpayer on whom the tax is imposed (i.e., the individual who has legal title for property taxes). See IRC 164(a) and related TRegs.

In essence, there are 2 different rules: For the mortgage interest, you can split. For the real estate taxes, you probably will only get the deduction for the party listed on the legal title.

The SSN of the 1098 does not necessarily limit who gets the deduction. Although having both listed on the 1098 might avoid IRS inquiry if you choose to split both expenses.

Riley2 (talk|edits) said:

3 January 2006
As indicated above, as long as the taxpayer is either the legal or equitable owner of the property, there should be no problem with deducting the actual amount paid by each taxpayer. If they co-mingle their funds, it may be difficult to determine each owner's contribution to the mortgage payment.

Solomon (talk|edits) said:

5 January 2006
Probably best to follow Pub. 936 instructions and attach a statement to the return or 8453 showing how much each paid and include the name and address of the one who received the 1098.

Skhyatt (talk|edits) said:

10 February 2006
I follow that two or more can split a mortgage interest deduction. Can someone point to it in the code? I haven't been able to find it there.

Estock (talk|edits) said:

10 February 2006
I have a lot of domestic partnerships where the partners split the interest and taxes - I include a statement on the return if one of the partners is not listed on the mortgage statement - stating that the partner is 50% owner of property with the other partner, and I list the name and social of the other partner.

Been doing this for years with no problem

Riley2 (talk|edits) said:

10 February 2006
Skyhyatt, the code doesn’t really say that.

Mortgage interest can be claimed by a joint owner under the general principles of Regulation § 1.163-1(b) to the extent that he can prove that he actually paid these amounts.

Gmikeg (talk|edits) said:

11 February 2006
I have this very situation from a new client. She lives with her mate, and she is not on the mortgage due to credit issues. They both own the home, and they share the payments. My question: How much proof does she need to satisfy the IRS?..........Thanks, ....Mike

Riley2 (talk|edits) said:

11 February 2006
She needs to prove 2 things: 1) She is either the equitable or legal owner; and 2) the amount of her contribution to the mortgage payments. If she is on title, then item 1 is easy. If not, she will need to prove that she has all the "burdens and benefits" of home ownership.


Ld925 (talk|edits) said:

1 February 2007
I have a client with a similar situation. She is on title not on loan. She has paid mortgage on the loan and has canceled checks to prove it.

Where on the tax return will this deduction get reported since she does not receive a 1098 from the lender?

Deback (talk|edits) said:

February 1, 2007
On Sch A, as normal, but attach a note listing whose name and SS# is on the 1098 form.


Wdove511 (talk|edits) said:

29 February 2008
OK. I agree that the interest can be split. But what is the limit on the amount of debt that can be deducted? Does each partner get $1.1 million?

CATAXES (talk|edits) said:

29 February 2008
$1 million debt is the tax return limit for MFJ. MFS half of that. In case of two single owners, each paying interest, you could have $2MM debt interest being deducted.


Lalva (talk|edits) said:

30 March 2008
Hello Almanacers!

Here is another question. What would you do in this case?

Domestic partners, both in title, both in mortgage, spliting deductions 50% each. I have reviewed their retuns and I found out that they both own rental property. One doens't have much income, and after the rental losses she doesn't have to pay taxes. Therefore her 1/2 of rental losses evaporates. The other one have high income, so she is actually the one paying the bills (joint checking account too). Even if she can only deduct up to $25k she could carry-over the loss for when they sell the property.

I am thinking on doing amended returns (04-06) to fix this and make the one with the high income claim the sch A mortgage/prop tax and sch E deductions.

My question is: Do you see any reason why I shouldn't amend the returns? Do you think that the IRS and CA will agree with my possition?

THANK YOU!

Trillium (talk|edits) said:

4 April 2009
FYI - several posts from consumers, and the related responses, have been moved to a discussion on the Consumer Forum - the link is available at the top of this discussion.

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