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by G. Scott Haislet, CPA, Esq.
Q. My domestic partner and I split paying the mortgage on our home. Although I am on the title for the house, I am not listed on the loan. The IRS says I cannot claim the interest deduction on my half of the mortgage payment. Is this true?
There is no specific requirement that the person claiming the interest deduction be a party to the loan (i.e., be a maker or borrower on the promissory note or the mortgage or deed of trust against the property).
You said that you and partner “split the mortgage”, so I must assume there is a loan and that it is secured by the property; thus the first condition is satisfied.
If two unmarried persons “split” a mortgage, checks should come from each person. For example, if the mortgage payment is $1,000 per month, then each person should actually pay $500, which would entitle each to claim one-half of the interest for that payment. On the other hand, if one partner agrees to pay the mortgage payment and the other partner pays food, insurance, and other household expenses, then it will be very difficult to prove that the partner not paying the mortgage payment is entitled to an interest deduction. Relatedly, two partners cannot simply split the sum of interest shown on the IRS Form 1098 (mortgage interest expense paid statement issued by the bank) without actual payments. This would be true even if the partner on the loan who gets the 1098 form in her name did not pay any payments. The 1098 Form report does not trump the failure to actually pay the payments.
The third condition is ownership. If a partner is on the title, and the property secures a qualifying mortgage loan (even though that partner is not a party to that loan), then that party nonetheless has an interest in seeing that the payments are made. That’s because failure to pay the mortgage payments will result ultimately in foreclosure (and forfeiture) of the property.
I suggest you review your situation with a tax expert, such as a CPA. If you meet the above conditions, you should be able to take advantage of the mortgage interest deduction.
G. Scott Haislet, CPA, Esq. is a tax adviser, estate planner and real estate attorney. You can reach him at (925) 283-1031.
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In accordance with IRS Circular 230, the information on this website is not intended or written to be used, and cannot be used as or considered a "covered opinion" or other written tax advice and should not be relied upon for the purpose of avoiding tax-related penalties under the Internal Revenue Code; promoting, marketing, or recommending to another party any transaction or tax-related matter(s) addressed herein; for IRS audit, tax dispute or other purposes.