Can I claim mortgage interest if my name is on the mortgage but not the deed?

[elci525]

This might be a sort of strange and terrible situation, but such is my life. I helped my parents purchase a condo last year as they would not have qualified for the mortgage without my credit and income. I owe them my life so I agreed, but unfortunately the condo was in a 55+ community. I am not 55+ so could not be listed as a property owner on the deed. So hooray for me I own taxes on the property but enjoy none of the ownership. I was wondering if I could still claim any deductions on my taxes since I do pay interest on the mortgage - we split it three ways. Is this possible? Is it best if we file or visit the same accountant together? Or do I have no claim to this since I am not a property owner?

[Anonymous]

the IRS says to deduct the interest you have to be either the legal or an equitable owner of the property. reg 1.163-1(b)   thus you do not have a deduction. 

[JGTMoney]

My girlfriend and I own a home together and we are currently in the process of breaking up and selling the house. The mortgage is in her name, since she had better credit when we purchased the house, but we are both on the deed/title and are "tenants in common." We have both evenly split the cost of the mortgage and utilities in 2019. For my taxes this year, do I have a right to claim 50% of the mortgage interest deduction even if she disagrees and demands to get it all? She has done that in the past even though we were still a couple, despite the fact that I felt this to be unfair. Thank you!

[KarenJ2]

Yes, if you are a legal owner of the home, you can deduct the amount of mortgage interest you personally pay.

If your name is on the legal title to the home, even if you are not directly liable for the mortgage, you can deduct any interest you pay on the debt.  This is an exception to the general rule that you cannot deduct interest if the debt is not yours.  

Treas. Reg. §1.163-1(b)

[JGTMoney]

Thank you! Quick follow up question - what if she wants to claim it all and doesn't want me to claim any, even though she only paid half of the mortgage? Could I argue that it's not her choice, that we have to split the adjustment based on what each of us paid? 

[VictoriaD75]

You actually have to make the payments on any expense you deduct on your tax return, whether it be medical expenses or mortgage interest, etc. She would have to prove that she paid the interest that she is claiming on her return.

Keep in mind. Mortgage interest and property taxes are itemized deductions. You would only itemize if your total deductions exceeded the standard deduction for your filing status. If you are not itemizing, claim these deductions will have no effect on your tax return.

Deducting Mortgage Interest

[Opus 17]

@elci525 

You do not have to be a legal owner on the deed but you must be an "equitable owner."  This is somewhat complicated to describe in a short answer here.  Best explained by example.

1. A man bought a home for his brother, a new immigrant with no credit history.  the brother lived in the home and made all the payments and performed all the maintenance and other responsibilities of ownership.  The tax court ruled the brother was the equitable owner and could deduct the mortgage and taxes.

2. A man lived with his father in his father's home. He provided care for his disabled, fixed-income father, performed all the maintenance and other responsibilities of ownership, paid all the taxes, and expected to inherit the home when his father died.  The Tax Court ruled he was the equitable owner for the deduction.

Here, you may well be the equitable owner, if you pay all the bills and accept all the responsibilities of ownership.  It may be more complicated for you given the situation and that your parents likely committed some kind of fraud to buy in a restricted community you don't qualify for.  If you do claim the deduction, you are taking a risk, and will have to explain to the auditor and the Tax Court how you should be considered as the equitable owner.  It's a risk, good luck. 

[Opus 17]

@JGTMoney 

The taxpayer who claims the deduction must be legally entitled and also be the person who actually paid the expenses.  As a practical matter, if you claim half and your GF claims 100% of the interest and taxes, the IRS will probably catch it by matching the interest claimed to the 1098 issued by the bank.  In that case, you will both get letters, and you will need to be able to prove your case that you paid half the expenses.  Good luck.