We both can't claim the mortgage interest on our taxes...if I'm paying the mortgage, but the loan is still in his name...who claims it on their tax returns??
2006-10-17 05:45:45 · 10 answers · asked by rcarltonr 2 in Business & Finance ➔ Renting & Real Estate
I buy the house subject to existing mortgage. He quit claims the deed to me, but his name is still on the loan. The bank doesn't use the "due on sale" clause because they don't care...they just care that they're getting a check every month, like clockwork.
We both can't claim the mortgage interest on our taxes...if I'm paying the mortgage, but the loan is still in his name...who claims it on their tax returns??
2006-10-17 06:23:59 · update #1
Hopefullly you have a contract for what you are doing. Most loans these days are not assumable. You need to see a lawyer to cover what you have done. Title cannot be given to you unless you go the register of deeds and file the quit claim and pay transfer taxes. If you havent done this, the property is not yours. You cannot claim any expenses on this property until the property is in your name. So if you are paying the mortgage payment and the loan is still in the other person's name, he still owns the property and the interest is his. If you have transferred the property and it is in your name, you may claim your share of the interest for 2006 that you paid. You also need to pro-rate the real estate taxes. You get your share, he gets his. However, if the property is not yet in your name, you could be screwed. Take care of this immediately. As long as the property is in his name, he can second mortgage the property, put the property up as collateral etc. If you have done this, the interest and taxes are pro-rated for the number of months you owned the property. Next year, the expenses will all be yours.
2006-10-17 06:43:33 · answer #1 · answered by juncogirl3 6 · 0⤊ 2⤋
You can only legally do that if the mortgage is assumable. Modern assumable mortgages stipulate that the lender must approve a substitute borrower.
Lenders take a VERY dim view of the practice of ghost borrowers. They may let it slide in case of the estate of a decedent, but will very likely invoke the due on sale clause if they do not approve the purchaser as a substitute borrower. In some states it is against the law to sell the house without the approval of the mortgage lender, even if the loan is assumable without the lender's consent. This is to prevent the practice of equity skimming.
Among other things, the lender will issue the 1098 in the name of the borrower of record. They get the tax deduction, not you.
Actually, since what you are doing is contrary to public policy, and maybe illegal, the IRS will likely disallow the deduction for BOTH of you. So the most correct answer is, NEITHER of you get the deduction.
2006-10-17 07:04:58 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 0⤋
Subject To Existing Mortgage
2016-11-05 00:01:18 · answer #3 · answered by ? 4 · 0⤊ 0⤋
Whom ever is on the loan. Most notes are not assumable. So you must be doing a contract for deed or a land contract. If this is the case, Then pay monthly by check ONLY, and in 1 year you can fiance in your name as a re-finance. You want your name on the deed of trust as soon as possible as any thing the current owner does or may do can effect the property if they were to get sued and loose for example. You will need a paper trail of checks to prove you have been there 1 year with the signed land contract or legal debt instrument. But No you do not get the mortgage interest on the home if the mortgage and deed of trust are not in your name.
I am a mortgae banker
2006-10-17 06:01:46 · answer #4 · answered by golferwhoworks 7 · 0⤊ 0⤋
The person who makes the periodic mortgage payment can claim the interest included in that payment, period. If you buy the house on April, the seller, (assuming he made all the payments until sale) would be entitled to claim the interest portion of the January, February, & March 1st payments. You would be entitled to the interest on the April thru December payments. Exactly what the interest component is of each payment must be calculated. If you have an amortization schedule, you can use that. If not you can create one. The mortgage lender will generally not do the calculation for you.
If you close on March 15th, & the Seller made the March 1st payment, you owe the Seller 1/2 the March payment. So technically, in that case you would be entitled to deduct 1/2 of the March interest & the Seller would be entitled to deduct only1/2 of the March interest. In practice, as interest deductions are personal & so impossible to calculate in an objective manner, nobody bothers to pro-rate the interest; they just pro-rate the whole payment & it is up to the taxpayer to calculate the deduction when s/he does his/her taxes. Unless you are dealing with multi-million dollar commercial properties, the amounts will be so small that the IRS will not bother to go into the matter.
2006-10-17 07:18:04 · answer #5 · answered by Anonymous · 0⤊ 0⤋
Generally speaking, you are paying the interest, so you claim it on your tax return. The first problem is that the bank will send the 1098 to the name that they have on the loan. Since the seller isn't paying anything they aren't entitled to deduct it. You may have to send a 1099 to the seller in order to claim your deduction. Check with your CPA.
The second problem is that there are a lot of things which must be met before you can deduct it to begin with. Some "subject to" deals (i.e. unsecured wraparound mortgages) do not permit deduction, so whether you can deduct it depends on your deal.
2006-10-17 07:24:55 · answer #6 · answered by BizAnswers 3 · 0⤊ 0⤋
IRS can not impede a legal contract between the parties and other parties affected by the transaction if everyone is in agreement to the contract struck. IRS will allow a deduction of interest on a principal residence if all the parties are in agreement as to who holds title to the property as a principal residence and who is ultimately responsible to pay on any and all encumbrances on the property relating to the original contract to purchase. You will have interest to pay on the agreed upon purchase price balance you will make a payment on that balance to the seller who will then pass the payment to whomever they owe money to. You will deduct the interest on your payment the seller will declare all income received and expense any cost using the property sold as an investment not a principal residence. Check it out don't just take the opinions in this forum:
IRS publication on Home interest deduction: http://www.irs.gov/publications/p936/ar02.html#d0e1835 and or: http://www.irs.gov/faqs/faq3-6.html
IRS: Tax information when buying a home: http://www.irs.gov/publications/p530/ix01.html
IRS: Deductible costs when purchasing real property:
http://www.irs.gov/publications/p551/ar02.html#d0e2000
IRS: Gain and losses on real property:
http://www.irs.gov/publications/p544/ch01.html
IRS: 3.6 Itemized Deductions/Standard Deductions: 6. Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses): http://www.irs.gov/faqs/faq3-6.html
Buena Suerte
2006-10-17 07:25:25 · answer #7 · answered by newmexicorealestateforms 6 · 1⤊ 0⤋
You can claim it if he's not claiming it. That sounds only fair since you are making the payments. If you both try to claim it, I think whoever gets the 1099 form from the lender will win.
2006-10-17 09:10:14 · answer #8 · answered by Anonymous · 0⤊ 0⤋
Sounds interesting
2016-08-08 17:23:12 · answer #9 · answered by Anonymous · 0⤊ 0⤋
That's a good question!
2016-08-23 08:56:51 · answer #10 · answered by Anonymous · 0⤊ 0⤋