Author Topic: Mortgage Interest Deduction with multiple owners  (Read 443 times)

J_Stache

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Mortgage Interest Deduction with multiple owners
« on: February 28, 2017, 07:51:04 AM »
My fiance and I bought a house together in 2016 and share mortgage payments.  We are filing separately for 2016, but effectively share finances so our combined refunds will all go into savings.  My question is, do we have to split the mortgage interest and property tax deductions (MIPTD going forward) or can I apply them to just one of us?  My plan is to enter all forms that are not shared (e.g. W-2, 1098-E, etc) and then try three scenarios: 
1. MIPTD applied 100% to me and 0% to her.
2. MIPTD applied 0% to me and 100% to her.
3. MIPTD applied 50% to me and 50% to her.

The IRS guidance on this is vague (from what I found).  Does anyone have experience with this?  My goal is to get the biggest refund without running a foul of the IRS.

MustacheAndaHalf

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Re: Mortgage Interest Deduction with multiple owners
« Reply #1 on: March 01, 2017, 05:19:53 AM »
My return was picked for the IRS national research program, where they audit all parts of a tax return to find out what taxpayers are doing in particular.  The IRS agent asked specifically how I calculated the mortgage / property taxes between owners, and accepted my explanation of ownership percentage even though it changed over time.

It seemed like two things were important: I had a method to calculate ownership, and nobody took more than the total deductions (of mortgage and property tax).  If you "pick" 0% for you or her, that seems strange.  Why aren't you using ownership percentage of the house?

The 1098 will have a taxpayer on it - let's say it's you, and say you own 50%.  You divide the amount on 1098 by 2 and put that on your tax return.  Your fiance lists the other half.  She received it "as a nominee" or something similar, and will list your social security number in that spot on her return (so the IRS can track down the original form, and double check it adds up).  Your situation may differ - this is just one possible way it could work.  Definitely look up "nominee", and search your tax software for that term.

Prairie Stash

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Re: Mortgage Interest Deduction with multiple owners
« Reply #2 on: March 08, 2017, 08:14:51 AM »
Pretend its not your fiancÚ and instead a good friend that owns 50%. Now pretend the friend makes 10 times your salary and offers you a deal. The friend will pay you for the exclusive use of all the deductions, so you'll get your proper amount from your friend instead of the IRS. Now pretend the friend owns 10%, does that make it even worse?

Sound legal? Will the IRS go for it?

J_Stache

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Re: Mortgage Interest Deduction with multiple owners
« Reply #3 on: March 09, 2017, 07:59:58 AM »
Thanks for the great answers.  Looks like splitting it 50/50 is the only proper option. 

Goldielocks

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Re: Mortgage Interest Deduction with multiple owners
« Reply #4 on: March 09, 2017, 04:55:38 PM »
Thanks for the great answers.  Looks like splitting it 50/50 is the only proper option.
Bless you have a household arrangement that she pays for the living expenses and you pay for the home.. Or something official and pre existing that can be used to support you calc to a rational person