Real Estate and Taxes?

Question

I currently own a house with another person. We're not married so I was curious of how that would work for tax purposes. Can only one of us write off the interest on the house or can both of us since we're not married?

Answer 1

Who owns the house is not really the key point. What matters is:

1. Who is obligated to pay the loan, and

2. Who makes the payments.

If you are both on the loan (50/50), the correct way to divvy up the interest paid in a year is based on the pro rata payments each made.

Suppose you pay 100% of the mortgage payments in a year. You get all of the interest deduction because you are obligated to pay the loan. (The lender has recourse against both of your shares if one pf you does not pay his share. That is they won't foreclose on a fraction of a home.)

There is no transferring of your right to deduct the interest to the other because he/she did not pay it which is one of the conditions for a taxpayer to deduct the interest. So, the person who suggested playing it for least tax across 2 returns is incorrect.

Answer 2

You can deduct the interest for tax purposes if you are paying the interest. If you are both paying, each of you can deduct your share. You cannot both deduct the full amount of interest, only your share of it.

The best approach is to calculate the tax return with each alternative, then select the method that allows your joint taxes to be smallest. The same applies to property tax.

Answer 3

Absolutely! You paid the cash into escrow. Be definite to determine if the ordinary-deduction-plus-RE-tax-deduction is better than listing. You do not always ought to itemize to obtain advantage for truly property taxes you paid.

Answer 4

Whoever pays the interest can deduct it. If you split the payments, you can also split the deduction. The total deducted by the two of you can't be more than the total paid.