TomD8
Level 15

Deductions & credits

@crystalmcatee 

 

Is your in-laws' name still on the deed to the property?  If not, there are tax problems with your arrangement.

 

The tax issue in your situation is that a taxpayer cannot deduct the mortgage interest or property tax on a home in which they have no ownership interest. 

 

From IRS Publication 936: 

You can deduct home mortgage interest if all the following conditions are met.

You file Form 1040 and itemize deductions on Schedule A (Form 1040).
The mortgage is a secured debt on a qualified home in which you have an ownership interest

https://www.irs.gov/publications/p936

 

Similarly, the IRS rule with regard to the property tax is this:

To be deductible, the tax must be imposed on you, and you must have paid it during your tax year. 

https://www.irs.gov/taxtopics/tc503

 

If your in-laws are not owners of the property, the property tax is not imposed on them, and therefore they cannot deduct it.

 

Bottom line: Unless your in-laws are legal owners or part-owners of the property, they cannot deduct either the mortgage interest or the property taxes.

 

 

**Answers are correct to the best of my ability but do not constitute tax or legal advice.