Roommate & Mortgage Interest Deduction

[kjc7]

I have a roommate - we share living expenses. Recently she asked me about the mortgage interest deduction, and shouldn't she benefit from it because she helps to pay the property taxes, too? I don't know the answer to that, and haven't found anything about it on a Google search. What do others do?

[SweetieJean]

Is your roommate listed as a borrower on the mortgage?  An owner on the deed?

[xmasbaby0]

If your roommate is not legally obligated to pay the mortgage or the property tax then roommate cannot enter anything about those expenses on a tax return.   The homeowner whose name is on the mortgage and deed is the person who gets those deductions.

[kjc7]

My roommate is not on the deed/mortgage and does not report rent or expenses paid on her taxes. Trying to do the right / equitable thing.

[xmasbaby0]

Your roommate is not on the deed, not on the mortgage---did not put down any money for the house when it was purchased?   Roommate cannot be foreclosed on if the mortgage payments are not paid?   Roommate's credit will not be affected if the mortgage payments are not made?   The state/county will not come after roommate if property taxes are not paid?

Sounds like you have all the risk---you are not being unfair.   And roommate has no legal standing to deduct mortgage interest or property tax.   Don't fall for the guilt trip.

If you and roommate have a written lease and there is a rent credit/deduction in your state---roommate can use that.

There is not a rent deduction or credit on your Federal return.  If your state has anything for renters you will be prompted to enter your rent info when you complete your state return.  As far as I know, the states that have anything for rent are Arizona, California, Connecticut, Hawaii, Indiana, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, Rhode Island, Vermont, Washington DC, and Wisconsin.

[TomD8]

In short, per IRS rules your roommate cannot deduct property taxes or mortgage interest on her tax return.  How you work things out financially between the two of you is a personal decision.

[Opus 17]

It’s unclear what you are really asking, because roommate might mean a stranger that you rent part of your home too, or it might mean your long-term romantic partner whom you share your life with.  

If you are renting part of your home to a stranger and you have a written lease, then your tenant is not entitled to any of the benefits of home ownership.  Of course they are paying part of your mortgage, taxes, utilities, and so forth; that’s the whole point of being a tenant. In some states and for some levels of income, a tenant can claim a portion of their rent towards a property tax rebate. That would be dependent on your state law and your tenant’s personal tax return.

If by roommate you mean your partner whom you share your life and finances with, then even though you share expenses, only you can deduct mortgage interest and property taxes because only the owner of the property who is legally obligated to pay the mortgage and the property taxes can deduct them.  if you were to refinance your home and your partner was jointly on the mortgage with you, then your partner could deduct some of the mortgage interest. If you give part of your home to your partner via a deed, then your partner could deduct part of the property taxes. If you get married, then you will deduct these expenses together because marriage imparts ownership as far as taxes are concerned. But as long as you are unmarried and your partner is not a borrower on the mortgage and is not an owner listed on the property tax bill, they can’t deduct those expenses.  If your partner wants a few dollars of your tax refund to compensate them, that would be up to you, but then again, if you are squabbling over a few dollars, I think you have bigger problems.

[xmasbaby0]

And.....it might all be a moot point anyhow.   Do you even have enough itemized deductions to have any effect on your tax due or refund?   Many people ---even homeowners -- do not have enough itemized deductions to make a bit of difference.

HOMEOWNERSHIP DEDUCTIONS

It is very hard for a lot of people to use itemized deductions now that the standard deduction is so much higher.  Your home ownership may not have any effect on your tax due or refund, especially if you purchased the house late in the year.  

Standard Deduction
Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund.  The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting  tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach.  The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you.  Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes. 

2021 STANDARD DEDUCTION AMOUNTS

SINGLE $12,550  (65 or older + $1700)

MARRIED FILING SEPARATELY $12,550  (65 or older + $1350)

MARRIED FILING JOINTLY $25,100  (65 or older + $1350 per spouse)

HEAD OF HOUSEHOLD  $18,800  (65 or older +$1700)

Legally Blind + $1350

[kjc7]

Thank you all!

[Carl]

In order for one to claim the mortgage interest deduction and property tax deduction on their tax return, two criteria must be met.

1) They must be legally obligated to pay it

2) They must actually pay it.

If both conditions are not met, then the deductions can not be claimed.

If you own the property and  you do have a room mate who is not related to you, I would expect you to have some type of written lease agreement between you and that room mate where they are renting a room from you and that room is for the exclusive use of the renter. In such a case the renter of that space may be able to claim the "renter's credit" on their tax return, provided the state taxes personal income and also offer's such a credit. This would require that you report the rental income on SCH E as a part of your personal tax return.