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here is my situation. my parents own a house and the mortgage is under their names. they have VERY low income so every year at tax time i itemize the mortgage interest and get a huge tax refund as a result even tho the mortgage is in their names. Now my dilemma is this...i plan to buy my own house with the mortgage in my own name. can i itemize the mortgage interest from both properties and get an even HUGER refund?

2007-07-20 17:04:02 · 5 answers · asked by VanillaIce 3 in Business & Finance Taxes United States

5 answers

First off, you're breaking the law by claiming their interest deduction. To claim a mortgage interest deduction you must be legally obligated to pay the mortgage and you must actually make the payments. This is clearly not the case in your situation. Even if you are making the payments, you are NOT entitled to the deduction. And if you ARE making the payments, your parents can't take the deduction either.

Sooner or later this is going to bite you in the backside. Since your SSN isn't on the Form 1098 from the mortgage lender, the IRS will figure this out and will come back to you and ask for proof of the mortgage interest deduction that you claimed. When you can't provide a copy of the mortgage contract with your name on it they'll disallow the deduction and bill you for the taxes due along with penalties and interest from the original due date of the return.

If you don't have the funds immediately available to pay the taxes due it's quite likely that the tax debt will show up on your credit report and very well may prevent you from getting your own mortgage.

You need to file amended returns for any and all tax years that you illegally claimed your parent's mortgage interest for and pay any taxes due. The longer you delay on this, the more expen$ive it will get for you.

CommonCents is TOTALLY correct. You WILL get bit in the @$$ over this one, the ONLY question is when -- and the longer it takes, the more it will co$t.

2007-07-20 21:18:52 · answer #1 · answered by Bostonian In MO 7 · 0 0

You have a bigger dilemma than you think. You have been deducting their mortgage interest illegally, and if you get caught you'll have to pay back whatever tax savings you've had by doing it, plus interest and penalties. Even if you are the one paying the interest (and you don't say that) you are not allowed to deduct interest on a mortgage you are not legally responsible for, and if your name isn't on the mortgage, you aren't legally responsible for it. If you aren't paying it, it's definite fraud. If you are actually paying it, you might have a good argument that you just made a mistake, but would still be liable for paying back all you've "saved" plus the interest and penalties.

So STOP deducting their interest. When you get your own mortgage, you can deduct your own interest and property taxes.

To be really legal about this, you'd need to go back and amend the filings for any years where you deducted their interest, and pay back the additional taxes. Sure, I hear you say, I'll just run out and do that right now... ;-{

You CAN get caught on this pretty easily, since your social security number isn't on the 1098 form sent to the IRS. If anyone looks at your "huge" refund, it will show right up.

2007-07-21 03:19:47 · answer #2 · answered by Judy 7 · 0 0

I assume you have been taking this deduction for only a few years. The mortgage company issues tax documents (Form 1098) showing the social security number of the mortgage holder. That information is sent to the IRS.

The IRS will cross-check the Form 1098 against the tax return. Eventually you will receive a letter regarding this deduction, to which you were not entitled. You will have to pay back the refund you received based on this deduction.

Amend your returns in which you took this deduction before the IRS sends you a notice.

Of course you can deduct mortgage interest and real estate taxes you paid for your own home.

2007-07-21 03:44:15 · answer #3 · answered by ninasgramma 7 · 0 0

MY OPINION:

Deducting the mortgage interest for a loan that you are not on (even though it is your parents) is COMPLETELY illegal.

You better hope that you don't get caught. The fines and penalties are huge, it is tax fraud.
The interest paid is reported to the IRS to the SSN attached to their loan. It's not you. Computers catch this sort of thing.

How long have you been doing this ?? I'm surprised that you haven't been caught.

Ignorance of the laws is no excuse.

A great way for you to get caught is by buying yourself a house. It could raise red flags, bells and whistles.

You should talk to a CPA, VERY very soon, like today.
If I am wrong, someone will correct me here real soon, and I will retract.

2007-07-20 17:11:31 · answer #4 · answered by CommonCents 4 · 2 0

properly...i'm surprisingly confident what you have been doing is against IRS regulation. permit's wish you don't get caught there. i assume instead the question you pose....i'm thinking why your dad and mom are not itemizing and getting the refund? do they understand there's a refund or are you in basic terms taking it from them? i assume you will desire to declare the two for a larger refund...yet you're finally gonna get caught in this....you are able to not use somebody else's components to greater suitable your earnings tax return....that's fraud ....i think of you have larger issues than your 2 mortgages here. stable success

2016-10-22 05:29:07 · answer #5 · answered by ? 4 · 0 0

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