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musthike
New Member

How to handle mortgage deduction for mortgages paid in lieu of child support and alimony.

I've been ordered to pay the first and second mortgage in lieu of a portion of alimony and child support payments.  The amount I pay in the two mortgages exceeds the individual amounts paid for both child support and alimony but is less than the sum of the two.  The decree does not specify that the mortgages are to be paid in lieu of one or the other first and then carry over to the other; it just states that they are to be paid "...as a partial payment of alimony and child support."  The title and mortgages remain in both spouses names but the mortgage is paid by direct deposit from my bank account.  Am I able to take all or a portion of the mortgage interest as a deduction in addition to the deduction I will take for the alimony amount?  Should it be assumed that half of the mortgage payments would go toward alimony and half toward child support thus each of us claim half of the mortgages interest as a deduction and then reduce the reported income and deductions for alimony by the amount (half of the mortgage payments) being assigned to the alimony?  Sorry, long question and my attorney is unsure in this matter.


1 Reply
Coleen3
Intuit Alumni

How to handle mortgage deduction for mortgages paid in lieu of child support and alimony.

I attempted to answer your question earlier but got bogged down by a lot of different pieces of information that never really reached an answer. I also said that you should consult your attorney but he obviously is no help. I can offer some links with information but like your attorney, I don't want to make any definite answer as there are many parts to this question.

First, here is a link to what is alimony and isn't alimony.

Alimony Requirements

Amounts paid to a spouse or a former spouse under a divorce or separation instrument (including a divorce decree, a separate maintenance decree, or a written separation agreement) may be alimony for federal tax purposes. Alimony is deductible by the payer spouse, and the recipient spouse must include it in income. 

A payment is alimony only if all the following requirements are met:

  • The spouses don't file a joint return with each other;
  • The payment is in cash (including checks or money orders);
  • The payment is to or for a spouse or a former spouse made under a divorce or separation instrument;
  • The divorce or separation instrument doesn't designate the payment as not alimony;
  • The spouses aren't members of the same household when the payment is made (This requirement applies only if the spouses are legally separated under a decree of divorce or of separate maintenance.);
  • There's no liability to make the payment (in cash or property) after the death of the recipient spouse; and
  • The payment isn't treated as child support or a property settlement.

Payments Not Alimony

  • Not all payments under a divorce or separation instrument are alimony. Alimony doesn't include:

  • Child support,*
  • Noncash property settlements, whether in a lump-sum or installments,
  • Payments that are your spouse's part of community property income,
  • Payments to keep up the payer's property,
  • Use of the payer's property or
  • Voluntary payments (that is, payments not required by a divorce or separation instrument).

Example

Under your written separation agreement, your spouse lives rent-free in a home you own and you must pay the mortgage, real estate taxes, insurance, repairs, and utilities for the home. Because you own the home and the debts are yours, your payments for the mortgage, real estate taxes, insurance, and repairs aren’t alimony. Neither is the value of your spouse's use of the home.

* Child support is never deductible and isn't considered income. Additionally, if a divorce or separation instrument provides for alimony and child support, and the payer spouse pays less than the total required, the payments apply to child support first.

https://www.irs.gov/taxtopics/tc452

Mortgage

If you were able to deduct the mortgage interest, you can't take an alimony deduction and a mortgage interest deduction for the same dollars.

The one who pays the mortgage can claim the deduction. To qualify to be able to claim mortgage interest, you need to:

  1. Own the home
  2. Be liable to pay the mortgage, and
  3. Make the payments

If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this.

Show how much of the interest each of you paid, and give the name and address of the person who received the form. Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13.

Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. Let each of the other borrowers know what his or her share is.

If you each make payments, it dilutes the tax benefits of your itemized deductions. In the future, for tax planning purposes, consider only one of you making the payments for the mortgage AND the property tax. The other alternative would be to pay them both from a joint bank account.



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