I bought a house with my significant other and she is self employed so I want her to be able to get the tax breaks for buying a house, do I still enter my 1098 document?

[TomK2023]

Please see this TurboTax FAQ: How do I deduct mortgage interest if I co-owned the home?

[xmasbaby0]

What do you mean "my 1098?"   Whose name is on the mortgage and deed?   Are both names on them?

Who actually paid the mortgage interest and property tax for 2023?    If both names are on the deed and mortgage, you two can decide which of you uses the deduction and enter them all one return or divide it up as long as you do not exceed 100% of the total.

It might have no effect on either of your returns.   People have high hopes of the refund/tax breaks they will get for home ownership and they are often disappointed when they prepare their first tax return since the tax laws changed for 2018 and beyond.

Home Ownership

There is not a first time home buyers credit on a Federal return. That ended in 2010. If your state has such as credit, you will be able to enter it when you prepare your state return.

Buying a home is not a guarantee of a big refund.  Your deductions for homeownership combined with your other deductions (if any) must exceed your standard deduction to change your tax due or refund. If you purchased your home late in the year, you do not even have a full year of home 

ownership deductions.

Your closing costs on your new home are not deductible except for prepaid interest, prepaid property tax or loan origination fees.  There are no deductions for appraisal, inspections, title searches, settlement fees. etc.

Your down payment is not deductible.

Your homeowners insurance for fire, hazard, flood, etc. is not deductible for your own home.

Home improvements, repairs, maintenance, etc. for your own home are not deductible.  

Homeowners Association  (HOA) fees for your own home are not deductible.

Go to Federal> Deductions and Credits> Your Home to enter mortgage interest, property taxes, and loan origination fees (“points”) that you paid in 2023.  You should have a 1098 from your mortgage lender that shows this information.  Lenders send these in January/early February.

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. 

2023 STANDARD DEDUCTION AMOUNTS

SINGLE $13,850  (65 or older/legally blind + $1850)

MARRIED FILING SEPARATELY $13,850  (65 or older/legally blind + $1500)

MARRIED FILING JOINTLY $27,700  (65+/legally blind) )  + $1500 per spouse

HEAD OF HOUSEHOLD  $20,800 (65 or older/blind)  + $1850)

[leffel21]

Both of our names are on the 1098 but only my social is on it and we both paid the mortgage and taxes. I would like for her to be the one that receives the deductions but do I still need to enter the 1098 document on my taxes?

[xmasbaby0]

If you are not entering anything about the mortgage interest, property tax or loan origination points you have no reason to enter the 1098 on your tax return.   

[leffel21]

She will be able to enter it on her taxes even if it’s my social on the document?

[Vanessa A]

Yes, even with your SSN on the 1098 and just her name, she would be able to enter it on her return.

However, a few things first.  She can only claim the portion she paid.  So, if she paid, half and you paid half, she can only claim half of the mortgage interest.

Second, mortgage interest isn't a self-employed tax break in general.  If she is using part of the home as a home office, then she would be able to take a prorated deduction for the interest paid, but could not claim all of the interest paid as a business expense.  For example, if your home is 2,000 sq. ft and she is using 200 sq. ft for her home office, and your mortgage interest for the year was $5,000, then she would be able to claim 10% of the $5,000 or a total of $500 for the self-employed deduction. 

The rest of the mortgage interest would be able to be deducted as an itemized expense if her total itemized expenses (NOT business expenses) are greater than her standard deduction. Itemized expenses include mortgage interest, state and local taxes up to $10,000, medical expenses in excess of 7.5% of your AGI and casualty and losses in excess of 10% of you AGI with the first $100 not counting towards the loss.  Your health insurance and all medical expenses are only deductible for the amount that is over 7.5% of your AGI.  This means if your AGI is $50,000, then the amount that is over $3,750 is deductible.  

Then your total itemized expenses would need to be greater than your standard deduction below in order to benefit from your insurance premium payments. 

The 2023 Standard Deductions are as follows:

• Married Filing Joint (MFJ)              $27,700
• Married Filing Separate (MFS)      $13,850
• Head of Household (HOH)             $20,800 
• Single                                                     $13,850                                

Blind and MFJ or MFS add $1,500

Single or HOH if blind add $1,850

Third, Itemized expenses will reduce your federal taxable income but not reduce self-employment taxes.  Self- Employment taxes are calculated separate from your regular income tax or your AGI.  They are based on business income.  So, if you enter the itemized expenses and it reduces your AGI to $0, but your SE income was $10,000, you would still have SE taxes on that $10,000 which would be $1,530.