Can we claim the interest on my deceased mother-in-laws estate on our taxes now that we have the EIN?

[Nakagaki]

My mother-in-law passed in December 2017. I filed taxes for her in January 2018. We moved into her house in January 2018 and have been paying the house note and bills. We just got the EIN for her estate in December 2018. Can we claim the interest on my mother-in-laws estate on our taxes now that we have the EIN and have been assigned the personal representative? I was going to file taxes for my deceased mother-in-law, but was unable to file on TurboTax because she passed away prior to 01/01/2018. Also note, my wife and I filed out 2018 taxes already and did not claim the estate.

[NCperson]

who owned the house in 2018? 

the estate would need to file a Form 1041 for all income generated and expenses in 2018,  Then if there is a gain, that gain can be distributed via a K-1 to each of the beneficiaries taking their fair share as defined in the will. 

might be best to talk to a estate tax person - 30 minutes should do it - to determine the best approach.  the cost may well be worth it. 

also, timing is critical.  If there is a gain, the tax rate goes to the maximum very quickly...37% at just $12,000 of income after deductions.  The personal representative  can distribute that 2018 gain so the beneficiaries can report it on their taxes at their presumably lower tax rate as long as long as the cash is distributed by March 5 (65 days after Dec 31 per IRS regulations).  

hope that helps 

[Nakagaki]

First I'd like to thank you for the helpful information NCperson!

Before I pay spring for an estate tax person, I'd like to give you some more information about the situation. The house is still under my mother-in-laws name. We kept paying the note from our bank account as we didn't want the payments to fall behind. 

My wife is the sole beneficiary as she has no siblings and her father has passed a few years ago. The interest paid on the the house is less then $10,000 and my mother-in-law has only about $2,000 in her bank account (if that matters). 

Should I buy TurboTax Business and try to file by myself? Thanks again! 

[NCperson · Accepted solution]

because there is no net income, I do not believe you can flow the interest expense from the estate to your tax return.  The house would need to be in your wife's name (or yours or joint - just out of the estate's name) to do that. 

if you are going to file with the standard deduction in any event  that interest may not have made  a difference as you'd need over $24,000 of itemized deductions to make it worth your while  

doesn't seem that filing a Form 1041 is going to produce any value, but best to work on transferring the house to your wife so you can take advantage of the deductions in 2019 (again assuming it's greater than $24,400, which will be the 2019 number)

[Nakagaki]

Thanks again NCperson! Out next step will be to get the house under our name! 

Cheers!