Can I claim mortgage interest deduction if my name is not on the mortgage or deed but I paid all the payments and live at the house with my brother. We are 50/50 owners

[shounshell]

I am wondering you can point me to the publication regarding this?

[ThomasM125]

You can review IRS publication 936, Home Mortgage Interest Deduction, here is a link:

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

It seems that you need to be legally obligated to pay the debt to be able to deduct the mortgage interest.

[Opus 17]

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@shounshell wrote:

I am wondering you can point me to the publication regarding this?

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IRS regulation 1.163-1(b) says,

"Interest paid by the taxpayer on a mortgage upon real estate of which he is the legal or equitable owner, even though the taxpayer is not directly liable upon the bond or note secured by such mortgage, may be deducted as interest on his indebtedness."

https://www.law.cornell.edu/cfr/text/26/1.163-1

Publication 963 does not include this situation -- the publications are often written more narrowly to apply to the broadest possible audience.

You can deduct mortgage interest you pay, if you are the legal or equitable owner, even if you are not obligated on the loan documents.  Proving you are an equitable owner is the tricky part.

And an equitable owner can't deduct property taxes, because the law is written in such a way that it allows the possibility of equitable owners for the mortgage interest deduction but only allows legal owners in the property tax section. 

[yhuang8888]

i am a legally owner in deed and title also  i  pay the mortgage but i am not in the loan, can i deduct my tax.

[Mike9241]

You may be an equitable owner entitled to deduct your share of the mortgage interest and real estate taxes. An equitable owner is a person who has the economic benefits and burdens of ownership, based on the facts. Occupying and maintaining the home and paying the mortgage and taxes on it are (strong) factors that probably would indicate equitable ownership. An equitable owner can deduct interest paid on a mortgage even if they are not directly liable for the debt. IRS REG. 1.163-1. Further, mortgage payments and taxes paid from a joint account with two equal owners are presumed to be paid equally by each account owner (absence evidence to the contrary). However, if payments are made from separate funds, each taxpayer is entitled to deduct all the interest and taxes they pay with their separate funds (CCA 201451027).

no opinion as to deductibility is given if this is not your residence. the term is not defined in the code or regs. for tax purposes who is and isn't is mainly the result of court decisions.

 if this is a mortgage on your home, the rules for deductibility must be complied with. see PUB 936

https://www.irs.gov/pub/irs-pdf/p936.pdf 

[TomD8]

@yhuang8888 —

if you are a legal owner and you pay the property taxes, then yes, you are entitled to deduct them.

[susie1162]

The mortgage is in my daughter-in-law's name. She's been paying the mortgage to date. Her name, my name and my son's name are all on the title/deed of the house. If I started paying the mortgage on the house, even thought it's not in my name, can I take the tax deduction on the mortgage interest? The home is not my permanent residence. I live in another state. 

[Mike9241]

there is a concept in tax law referred to as equitable ownership.   if you were an equitable owner you could deduct the mortgage interest based on Phan, TC Summ Op 2015-1 even though you are not liable for those payments.

the decision for the taxpayer rested on the fact that the taxpayer occupied the property,  did everything an owner would do paid  all the bills, maintained the property including making repairs and improvements,  

you live out of state, so a key factor occupying the property is missing. in my opinion, you would not qualify to be an equitable owner so you get no mortgage interest deduction.  I offer no opinion as to whether those mortgage payments represent a gift to your DIL which would require you to file a gift tax return if the annual payments were over $15,000

[TomD8]

@susie1162 --

"Equitable ownership" is not the issue here.  Since your name is on the title/deed, you have an actual ownership interest.  So you qualify in that regard.

But in order for you to deduct the mortgage interest, the mortage must be a secured debt on a qualified home in which you have an ownership interest.   A "qualified home" means your main home or your second home.  See Qualified Home in this IRS reference for details:

https://www.irs.gov/publications/p936#en_US_2021_publink1000229900

So, with regard to your deducting mortgage interest, the issue is whether or not the home is a qualified home for you.

[susie1162]

Thank you for your quick response. I will check with my accountant on the gift issue, pertaining to my DIL.

[Opus 17]

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@susie1162 wrote:

The mortgage is in my daughter-in-law's name. She's been paying the mortgage to date. Her name, my name and my son's name are all on the title/deed of the house. If I started paying the mortgage on the house, even thought it's not in my name, can I take the tax deduction on the mortgage interest? The home is not my permanent residence. I live in another state. 

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If you make the payments directly, it would be dodgy to claim them as a gift and have your daughter deduct them.  There are rare situations where the IRS says it is acceptable to treat paying someone else's bills as a gift, but most of the time, a taxpayer can only deduct payments they make themselves.  

To avoid problems down the road, if you wanted to treat the payments as a gift to your daughter-in-law with your son and daughter in law making the payments and continuing to claim the deduction, you would need to send money (checks, electronically) to them and have them pay the mortgage.  A gift tax return would be required if the amount of the gift is more than $15,000 per person per year.  However, you can give up to $15,000 to your son and another $15,000 to your daughter in law without triggering the requirement.  (And gift tax itself is not owed unless your lifetime gifts are more than $11 million. Large gifts must be reported to track them against that limit.)

If you make the payments directly, you can deduct the interest as you are an owner of the property, even though the mortgage is not in your name, as long as you treat the home as your second home.  The IRS just says "A second home is a home that you choose to treat as your second home."  There is no specific requirement to live there.  (You may see other sources saying you must live there at least 14 days.  This is true if the home is rented the rest of the year; it is not necessary in the case where other family members are living there full time.)

Assuming the property taxes are paid from an escrow account that is funded from the monthly mortgage payments, you can deduct the property taxes even if the home is not your second home.  You can deduct property taxes on any property you own, even if you don't live there.  But, you may run up against the $10,000 cap on deducting state and local income and property taxes, if you also deduct your own state income and property taxes.  

It may be relevant to ask why this arrangement is now necessary and what you are trying to accomplish.

[susie1162]

Thank you for your response. The monies would not be claimed as a gift. The taxes and insurance are paid separately and I will be occupying the home for more than 14 days per year. My son and DIL would pay the taxes and insurance. The purpose is to make it easier for them to renovate the home and increases the value, as they're planning on moving out of the state in about 5 years. I will double check this with my accountant. Thanks again.

[SunnyDaisy88]

When we had a loan modification during the 2009 financial crisis due to loss of income, the mortgage company modified the mortgage. An error occurred and my name was removed from the mortgage, or my husband had it removed without telling me. Anyway, he is dead.  Can I deduct the mortgage interest deduction without my name on the mortgage? I will refinance once all my finances are in order and I am working on that, but it is at least 6 months out. 

[Opus 17]

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@SunnyDaisy88 wrote:

When we had a loan modification during the 2009 financial crisis due to loss of income, the mortgage company modified the mortgage. An error occurred and my name was removed from the mortgage, or my husband had it removed without telling me. Anyway, he is dead.  Can I deduct the mortgage interest deduction without my name on the mortgage? I will refinance once all my finances are in order and I am working on that, but it is at least 6 months out. 

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As long as you are an owner of the property, you can deduct mortgage interest you pay.  

If your name is not on the deed either, but you are the owner for practical purposes (while the legal paperwork needs fixing), you would be considered a "beneficial owner" based on your situation, and you can deduct the interest the same as if your name was on the deed.  

[Ms Tee]

In my case, my mother passed with a life deed on the house. The house was automatically deeded to me. I pay the mortgage but it's still in my mother's name along with the 1098. My quest ion is, can I claim the interest?