Paying rent to brother

[stech]

I live with my brother as we both own the house. In Sept we refinanced that home as mortgage was move from 2 people to 1 person. But my name is still in the deed. I continued pay mortgage & take care of house

last year, we took 50% interest and property tax on Sch A

i read on this forum, that since I am paying mortgage for my brother as “gift”, my brother would need to declare that on Sch E, as it’s not a “gift”

Since, I’m paying rent, I have side gig of 1099 MISC. I want to use that rent as business expense as rent. Does that mean my brother would have to show income? Even though he is not making money?

we did some maintence in house & I know it’s not deductible. But if my brother has to show my rent payment as income, he can use those maintenance as expense?

I was part of mortgage until Sept 2020. Can I choose to show I paid rent from Jan to Dec. or does it need to be split from Jan to Aug as mortgage deductions and sept to Dec as rent?

our maintenances we’re done throughout the year. Do we split those to on Sch E, since that property didn’t become rental until sept 2020

[Cynthiad66]

No.  None of this appears to be  Arms Length transactions.  You would need to establish  whether you are a tenant or just paying your half of the mortgage.  If you are still paying your half of the mortgage since you refinanced but you are still half owner, you and your brother can decide how you want to treat the mortgage interest deduction.

Based on what you described in your question, I don't understand where the "gift" is incurred.  You would not be able to use the "gift" or "rent" on your Schedule C with your 1099MISC because you are not in the business of renting properties.  If you had a legitimate rental property that would be on Schedule E Rental Income and Expenses.  But, I think you are trying to deduct the rent on your schedule C that you pay to your brother to live in the house you are 50% owner.  You cannot deduct rent.  It is a personal expense and is not deductible.

No, there are no circumstances where you can deduct rent payments on your tax return. Rent is the amount of money you pay for the use of property that is not your own. Deducting rent on taxes is not permitted by the IRS.

Maintenance on your home is not deductible.  It is not considered rental property but a residence for you and your brother. 

[stech]

Just because I mortgage is not under my name, but the deed has my name. Does this I’m still the owner of the house? That’s means I can’t be paying rent to my own house.

[KrisD15]

Yes, just because you are not on the mortgage, does not mean you do not own the house. 

You say you are listed on the deed, so that would indicate that you are part owner of the property. 

It sounds like you are in a similar situation as last year, just that the mortgage was refinanced in your brother's name only. 

You can either-

Pay half the mortgage payments and claim half the Home Mortgage Interest (since you still have an interest in the house) Your brother then would only claim the remaining half. 

or

Contribute to the household, whereas your brother pays the mortgage and claims all the interest.

Either way, you don't claim rent expense and he doesn't claim rent income.

The 1098 from the Lender does not need to list your name for you two to split the interest. 

[stech]

Apologizes. I just found out I’m not in the deed. So, now I can pay rent & claim it as tax deduction. Then my brother would need to file Sch E?

[DaveF1006]

You cannot claim rent payments as deductions on your federal return but you may be able to in the state where you live, under certain conditions. Check your state's revenue website to see if this is possible.

[stech]

Can you please explain why? Since Sept 2020, I was no longer owner of the house. I paid rent money.

thanks

[DawnC]

Because rent is not deductible on your federal return.  If you are self-employed and have an office in the house, you may be able to claim a home office deduction on your Schedule C.  However, there are no rent deductions on your federal tax return.   Your state may have one and if so, you may claim it there, but not on the federal return.  

If you're self-employed, however, housing-related expenses such as mortgage interest, rent, utilities, repairs, and depreciation for the portion of your home or rental that you use to run your business are allowable expenses under the home office deduction.

You may be able to claim the home office deduction if your office is:

• Used regularly and exclusively for your business, and
• Is your principal place of business (both conditions must apply).

When you enter your home office information in TurboTax, we'll ask some questions to determine if you can claim the deduction and how much the deduction is worth. You’ll need information like the square footage of your residence and the rooms you worked in.

Related Information:

• Where do I enter the home office deduction for my business?

[stech]

Isn’t Sch C part of federal return? Am I missing something here. I get 1099 MISC since I’m a contractor working from home. 

[ErnieS0]

You are able to deduct your portion of the mortgage interest and property tax you actually paid—even though your name is not on the mortgage or deed—under the “Equitable Ownership” principal. Equitable ownership means that you enjoy the same burdens and benefits as the owner of the property because you live there and pay your portion of the mortgage and taxes.

Regulation § 1.163-1(b) notes: 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.

Also refer to Uslu v. Commissioner, TC Memo 1997-551

Also refer to the answer by Alumni Champ @bwa to Living in home owned by family trust in CA. I pay the property tax, is that deductible?