My name is on the mortgage (not my son),my sons name is on the deed with mine, son lives at the property full time,pays the mortgage/taxes. Who can claim what for taxes?

[rmbm521]

My second home bought 2018, I own the mortgage.  Son lives in home, pays all expenses including mortgage.  Son is on deed with me.  What do I need to claim on taxes?  As a second home?  Can son claim mortgage interest, taxes on tax return?  I am a bit confused about a gift tax?

[TomD8 · Accepted solution]

Since your son has an ownership interest in the house (he is on the deed), he can deduct the mortgage interest and property taxes that he paid, subject to IRS limitations on the amount.

Since you did not pay any of the mortgage interest or property tax, there is nothing for you to deduct on your own return.

A gift tax return (IRS Form 709) must be filed on any gift over $15,000 (2018) made to any one person in any one year.  If you add someone's name to the deed on your property, the IRS may view it as a gift of one-half the value of the property.  The current (2018) federal estate and gift tax lifetime limit is $11,180,000 - so it is extremely unlikely that you'll have to actually pay any gift tax.  The reason for Form 709 is for the IRS to keep track of your gifts, which count against that lifetime limit.

https://www.irs.gov/pub/irs-pdf/f709.pdf

[crystalmcatee]

Really??

My husbands parents put the mortgage to our home in their names.  My husband and I are on the deed only.  We pay the full mortgage payment, taxes and insurance on the property to his parents directly each month.  My in-laws claim all the mortgage interest paid each year, they write off all the expenses, and last year when the escrow account balance was over the allowed amount....they kept the refund check.  I find this all very odd as they wont allow us to have any of the documents or information (only a copy of the quick claim deed that was done).  Also, on the note, that I found online with the registry of deeds, the mortgage is in their name and states it's their primary residence, which it never was at any time.  

[TomD8]

@crystalmcatee 

Is your in-laws' name still on the deed to the property?  If not, there are tax problems with your arrangement.

The tax issue in your situation is that a taxpayer cannot deduct the mortgage interest or property tax on a home in which they have no ownership interest. 

From IRS Publication 936: 

You can deduct home mortgage interest if all the following conditions are met.

You file Form 1040 and itemize deductions on Schedule A (Form 1040).
The mortgage is a secured debt on a qualified home in which you have an ownership interest. 

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

Similarly, the IRS rule with regard to the property tax is this:

To be deductible, the tax must be imposed on you, and you must have paid it during your tax year. 

https://www.irs.gov/taxtopics/tc503

If your in-laws are not owners of the property, the property tax is not imposed on them, and therefore they cannot deduct it.

Bottom line: Unless your in-laws are legal owners or part-owners of the property, they cannot deduct either the mortgage interest or the property taxes.

[Critter]

Let me see if I have this correct ... they bought the home and got a mortgage.  Then they quit claimed it to you and you are paying the mortgage/taxes/insurance on the home even though your names are not on the mortgage itself.    I suspect this was done because you could not get a mortgage on your own at the time. 

If this is the case then you ALL are perpetrating  a FRAUD on the mortgage company if they do not know about the quit claim.  So you have 2 options ... keep quiet and accept the system as is.    OR  tell the mortgage company and get a new mortgage in your names only to get them out of the mix.  

OR  you are all on the deed but only they are on the mortgage ... also a problem as mentioned in the other answer ... but if the mortgage company & insurance company &  the property appraiser (homestead exemption)   all  think they live there then you have multiple problems ... you are all not being honest with any of these entities and if there is an issue you could have severe legal troubles.  

Seek local professional legal council to get this straightened out. 

[rmbm521]

Critter,

This is an old post and I assure you there was not a quit claim done - all legally done.  Thank you for your insight.

[Critter]

@rmbm521 

I was responding to the new post on your thread ... not yours 😊

[crystalmcatee]

The quick claim deed that was prepared by a title company in 2017 added my husband and I to the deed with his parents.  All 4 of us are on the deed as of Oct. 2017.  My husbands parents are on the only owners on the mortgage loan which they obtained many years before I met my husband.  They initially took out the mortgage for him (prior to our relationship) because he was unable to qualify on his own.  He was not on title or the mortgage at the time of purchase.

After we got married, his parents wanted to be free of the liability and asked us about  putting the mortgage in our names.  My husband and I needed to be on the deed for 6+ months prior to refinancing and removing his parents, so that was our plan.  We had a title company prepare a quick claim deed that added my husband and I to the deed.    However, when the 6 months had past his folks asked that we wait until the next year to refinance.  They needed the "write off" that year (2018).  

The start of 2019 we discussed moving forward with the process of refinancing.  Unfortunately that didn't happen because my husband became very ill.  After several weeks in the hospital, he survived.  Then a month later, he had a stroke and other neurological issues.  To make an extremely long story short, his medical illnesses changed him into a different person and he filed for divorce in July of 2019 (still in progress).  The kids were forced out by my husband and his parents.   We found a rental quickly but now I'm not sure how to handle this years taxes.  I started preparing for the end of the year and came across the above post.  So I guess my question is; should my husband and I be listing the property on our taxes because we are owners on the deed and paying the full mortgage, taxes, and insurance?  Even though my husband and I are not on the actual mortgage loan with his parents?  (I'm not sure if we will be filing jointly this year or not as we are going through the divorce.  I'm still looking into this)

My husband is a very unhealthy 40 yr old.  Last month the main artery to his heart ruptured.  With so many medical issues, I'm not sure he knows what he's doing.   I'm really trying to figure this out on my own to make sure I do the right thing.

~ Sorry for the long story ~

[crystalmcatee]

Thank you for your response.  

The quit claim deed was done to add my husband and I as owners with his parents.  His parents could not be removed as they still had a mortgage on the property.  His parents obtained the mortgage loan for my husband years before I met him because he was unable to qualify on his own.  

I was never dishonest with anyone.   Maybe my husband lied when his parents initially bought the house for him.  All of this is very disturbing.   I would hope that wasn't the case but I would not be surprised after everything else that has surfaced through this divorce.

  I had no involvement with obtaining the mortgage loan.  I've never met the appraiser, tax assessor or had to deal with the insurance company.  The payment my husband and I make each month for the mortgage loan includes taxes and insurance.  His parents set that up with the initial mortgage that they obtained for my husband.  No homestead exemption was ever applied for and no credit is given on the tax bill.    I never needed to contact these people/entities.  We only paid the mortgage loan payment each month to his parents.  It's for reasons like this that we were trying to refinance to remove his parents because I felt like I didn't know what was going on and had no control over our home and financial investment with our home.   

Im sorry I guess this is all a bit much.  I'll have to see if I'm able to hire a tax attorney in effort to make sense of all of this and do what is right.

Thank you again.

[TomD8]

The IRS says this:  To deduct taxes or interest on Schedule A (Form 1040), Itemized Deductions, you generally must be legally obligated to pay the expense and must have paid the expense during the year. 

https://www.irs.gov/faqs/itemized-deductions-standard-deduction/other-deduction-questions/other-dedu...

If your in-laws are still on the deed, they have the right to deduct the portion of  the mortgage interest and property tax that they actually paid.  But from your description, in your situation they're taking the deductions but the payment is actually coming from you and your husband.  So technically you and your husband are entitled to the deductions, and they are not.  

So this is a situation that you and your family have to work out with each other.

[crystalmcatee]

Thank you!