mom and I are on the property deed but she is not on my mortgage. Can she make a contribution to the mortgage without tax implications?

[Bsch4477]

Since she is not liable for the mortgage she can’t deduct the interest payments. Her payments would be considered a gift to you and you would deduct the interest. 

[BS6067]

 Scenario: Property cost  $240,000  50/50 split ownership; Mom contributed  $100,000  owes $20,000 .  My mortgage is $140,000  - when she gathered balance  Mom will pay $20,000 towards mortgage so we each pay $120,000.  Is that $20,000 a gift or considered the balance to her half of the property? Deed is in both our names and check is made out to the bank.  If it is a gift who pays gift tax?

[Bsch4477 · Accepted solution]

Her contribution to the purchase of the home with her as partial owner has no tax or gift consequences. It is merely her investment in the home. But if you deduct her portion of the mortgage which she has no liability for, the money that she gave towards the mortgage is a gift to you. An amount over $15,000 ($30,000 if given with a spouse) requires reporting with form 709 which is completed and sent by mail separately from her tax return. Because of the large gift/estate tax exemption she won’t owe tax on that gift. 

[BS6067]

Thank you for your help!

[Opus 17]

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@BS6067 wrote:

 Scenario: Property cost  $240,000  50/50 split ownership; Mom contributed  $100,000  owes $20,000 .  My mortgage is $140,000  - when she gathered balance  Mom will pay $20,000 towards mortgage so we each pay $120,000.  Is that $20,000 a gift or considered the balance to her half of the property? Deed is in both our names and check is made out to the bank.  If it is a gift who pays gift tax?

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At this point you own the home 50/50, according to your documentation, even though the contributions are unequal at this point.  Making unequal payments on the mortgage does not change the ownership percentage and the payments are not gifts.

There are two tax scenarios to consider in this situation that you did not mention.

1. If your mother pays mortgage interest, she can deduct it on her tax return as long as she is an owner, even if her name is not on the mortgage.   Your mom can deduct interest she pays on her main home and one second home.  If this is her third home (or more), then she can't deduct any mortgage interest that she pays, but you can't deduct interest that you don't pay yourself.  

2. When the home is sold, you and your mom will each report capital gains and pay capital gains tax on half the sale.  In other words, the home appears to be worth about $240,000 right now.  Suppose you sell it in 10 years for $500,000.  You will have a $260,000 capital gain, with $130,000 of gain taxable to each owner.  If one or both of you lived in the home as your main home, you may be able to exclude that income from tax, but if you or she doesn't live in the home, the gain will be fully taxable to that owner.