Do I need to move in with my mother for tax purposes?

[missundecided]

My mother is RE (not sure if I'd call her FI) who recently used all of her nest egg (and there's nothing left now) to place a 75% down payment on a house. Since she only has a small rental income and no W2 income, she needed me to apply for a mortgage with her as I have a small W2 income and great credit. Because of this, I am also on the title 70 her/30 me.

But what's done is done--I'm not asking for face punches about this house purchase or shared mortgage, etc. It's already caused us enough stress and emotional toll as it is. (I've been a reader long enough, though, to know that there will probably be some words said about this arrangement anyway.)

My question is this: when I signed the bank's paperwork, I had to agree that this house would be my primary residence. Before I signed, I told them upfront that I wouldn't be living there, just my mom. (I have my own apartment.) The mortgage broker told me if I didn't sign, they wouldn't approve the loan. (She said it nicer than that, but that was the bottom line.) As for the tax benefit, since my mom needs the money more than I do, I'm willing to let her take the full deductible/credit/whatever it is, even though we're 70/30. However, since I said it would be my primary, do I need to move in with her to be kosher with the IRS? Or, do I need to change my official address but continue to live in my apartment, where I've already lived for almost three years, and no one will be the wiser?  Or, if I'm willing to give her 100% of the tax benefit, does it matter? Can she even HAVE 100% of the benefit, despite the structure of the title? If I have to claim the 30%, can I claim that, my apartment rent as a partial tax credit (it's an option here in CA), and still keep my address the same?

She promises that she's going to either refi or pay off the mortgage as soon as possible so that I can be taken off the mortgage and thus the title (I'm not exactly holding my breath), but in the meantime, I'm not really sure what I'm supposed to do to avoid an audit and be lawful AND still not move in with her (living together would be disastrous).

I'm sure I'm way over thinking this and that I'm envisioning problems where there aren't any, but before I ask an accountant, I thought I'd take the pulse of the collective wisdom of Mustachians.

[Catbert]

Okay, your already lied to the bank, but the good news is that the IRS doesn't really care! 

Who is actually paying the mortgage? If your mother is actually paying 100% of the mortgage then I *think* that she can and should get 100% of the write-off.  If you're making part of the payments then you should talk to an accountant about how to treat it.  Is it your "second home"?  A rental (with all the good and bad tax consequences)?

 

[TerriM]

You need to separate out the mortgage company from the IRS.

The mortgage company cares about whether it's your primary residence vs. a rental because they use different numbers to calculate the loan they'll give you.  Now that the contract is signed, as long as your mom is paying the mortgage, they shouldn't be bothering you at all.  They just want the check in the mail.

Just don't take the IRS deduction if you're not living there, because then you'd be lying.

[missundecided]

To answer your questions (and questions based on those questions):

-Yes, my mom is paying 100% of the mortgage, which is why I think it's more than fair that she take the full tax benefit, although she might argue with me about that. I just wasn't sure if she would be entitled to it. I'm glad that she is! (However, does that prevent me from trying to help out and throwing in a few bucks once in awhile against the principal, separately from her own payments? Not something she has asked me to do or even expects, I just want to be nice.)

-It's her primary residence, which is why when I told the bank my reservations about signing the paperwork, they said since SHE'd be living there, it's fine. I didn't intentionally try to lie: I was trying to be as transparent as possible with everyone.

-I don't have any rental property myself; MY primary residence is the apartment I'm renting from a third party. 

-If I ever do decide to move in with her, does that change my tax scenario?

Thanks for your comments and assuring me that I'm probably worrying over nothing.

[TerriM]

-If I ever do decide to move in with her, does that change my tax scenario?

Thanks for your comments and assuring me that I'm probably worrying over nothing.

If you move in, you may or may not be able to split the deduction.  I don't know, but it might be something to look into.  If your incomes are very different, the tax deduction could be worth more to one of you than the other.  I don't know if the party who takes the deduction would need to be the one writing the checks or if the IRS requires the split to be 70/30.  That's a great question.