CPA Question on Taxes - Shared Home Ownership

[Tidybuoy]

This is a question for a friend of mine.

My friend and his girlfriend bought a house together last year. Who takes the interest/prop tax deduction?

I recommended that he do each other's taxes with & without the deduction and see which way (combined) produces the best result. I'm not sure if you can divide the 1099's in half for each of them.

The other option would be to get married.....good grief.

[wdfifteen]

My friends used to alternate years to claim their kids. This sounds similar.

[Sooner or later]

Originally Posted by wdfifteen

My friends used to alternate years to claim their kids. This sounds similar.

This is a 1099 in one person's name. If they want to split it I think they have to notify the IRS and issue a split 1099 to the person not listed on the original 1099.

[wdfifteen]

Doesn't sound like they really own the house "together" if the bank is issuing 1099s to only one of them. They need to get that straightened out. It could make a contentious break-up a real mess.

[red-beard]

Why TF do these kids buy the house, have children, etc. first?

[nota]

Originally Posted by Tidybuoy

This is a question for a friend of mine.

My friend and his girlfriend bought a house together last year. Who takes the interest/prop tax deduction?

I recommended that he do each other's taxes with & without the deduction and see which way (combined) produces the best result. I'm not sure if you can divide the 1099's in half for each of them.

The other option would be to get married.....good grief.

I would strongly recommend checking that married tax penalty before being wed
bracket creep is very real with two higher incomes

if joint ownership why not split the deduction ?

[cstreit]

Shared asset always smells like disaster to me. (Not that you asked)

[Tidybuoy]

Originally Posted by wdfifteen

Doesn't sound like they really own the house "together" if the bank is issuing 1099s to only one of them. They need to get that straightened out. It could make a contentious break-up a real mess.

At this point, I have no idea what the bank will be issuing. The question came up a month or so ago and I did not have an answer for them at the time. They do indeed own the house together. I am simply following up.

[greglepore]

Who gets the 1098 has little to nothing to do with it. To take the deduction you must a) be legally obligated to pay it -meaning you must actually be on the mortgage/note and b) you must have actually paid it. If its paid out of a joint account, usually one person or the other if free to take 100% or the parties can split it, but never exceed 100%. If A writes the check, A takes it unless B has a paper trail that he paid A a portion of it-ie checks or some other record showing transfer of funds.

[Bob Kontak]

Originally Posted by greglepore

Who gets the 1098 has little to nothing to do with it. To take the deduction you must a) be legally obligated to pay it -meaning you must actually be on the mortgage/note and b) you must have actually paid it. If its paid out of a joint account, usually one person or the other if free to take 100% or the parties can split it, but never exceed 100%. If A writes the check, A takes it unless B has a paper trail that he paid A a portion of it-ie checks or some other record showing transfer of funds.

If both are on the mortgage do you really think the IRS is going to require this degree of proof as to who paid?

I think it would be perfectly ok to say we paid it out of our joint account and she derives a larger tax benefit from the deduction so she took it. Aggressive is not against the law.

[wilnj]

Originally Posted by Bob Kontak

If both are on the mortgage do you really think the IRS is going to require this degree of proof as to who paid?

My layman’s understanding is that there are things the IRS machine checks. The machine is looking for things like 1099s that have been filed with them by banks and employers and matching them up with your return.

Not sure what gets kicked back though.

[Porsche-O-Phile]

It seems like it could be a good idea if the proper legal documents / agreements are in place. IMO it’s a helluva lot better than getting roped into a marriage (and potentially risking everything down the road - including stuff that’s not related to property ownership like assets, retirement accounts, healthcare, beneficiary arrangements, etc.)

IMHO “traditional” marriage is the absolute stupidest situation someone can get him or her self into these days. It’s literally playing Russian roulette with your future - even with a prenup in place. Divorce laws are fked up to the point I’d never, ever consider it as an option - especially to supposedly simplify a house purchase. I’ve known too many people (particularly men) who’ve had their lives screwed up at the hands of family law court decisions and there’s zero political will to do anything about it, so... it’s better to not go there.

People partner up to buy real estate all the time - how is this any different? Get an attorney, hammer out the details of who accepts what responsibilities , who gets what benefits and how the partnership can be terminated / liquidated down the road (how to buy out the other party, right to liquidate / sell under particular circumstances, etc.)

[Sooner or later]

Official IRS answer

https://www.irs.gov/faqs/itemized-deductions-standard-deduction/other-deduction-questions/other-deduction-questions-2

With respect to mortgage interest, apply the home acquisition debt limit and the home equity debt limit to the qualified residence or residences to determine if all of the mortgage interest can be deducted. If you're unmarried and pay mortgage interest on the qualified residence, the limit on home acquisition debt and home equity debt is applied per taxpayer. See Publication 936, Home Mortgage Interest Deduction for the debt limit amounts.

If each taxpayer paid one-half of the mortgage and real estate tax expenses, then each Schedule A should reflect one-half as deductions. Both of you should attach a statement to your Schedules A explaining how you're dividing the mortgage interest and payments of real estate taxes. Your housemate, who didn't receive the Form 1098, must list the mortgage interest he or she paid on Schedule A line 8b, "Home mortgage interest not reported to you on Form 1098."

Please keep your records on your split of the deductions for the mandatory review period (statute of limitations) since the information reported won't match the records submitted to the IRS.