Mortgage Interest Deduction

[AccTaxMan]

I have been researching on the mortgage interest deduction requirements and I am very glad to find this thread:

http://www.thetaxbook.com/forums/showthread.php?t=14604

I think the consensus in that thread is that a taxpayer can take mortgage interest deduction if his name is on the title and he did pay for the mortgage interest even if his name is not on the loan.

The tax situation that I am handling is as follows:

Taxpayer is paying for the mortgage of his parent's home. His name is on the title. But his name is not on the mortgage. He does not live there.

Based on what I read in the above link, I am thinking he should be able to take the mortgage interest deduction if he considers that property to be his second home. Does anyone disagree?

Also, would you go as far as to amend his past 3 years tax return to claim the deduction since he has not claimed the mortgage interest in his original return filed?

[FEDUKE404]

I think it is close

I could be wrong, but the way I've always heard it is that a person cannot deduct either mortgage interest or real property taxes unless that person is legally liable for such payments in the first place.

In your scenario, I would say the person might have a (slightly) better chance with the property taxes versus claiming any mortgage interest for someone else's loan.

And if you amend for this reason alone, there could be some rough IRS waters ahead....there is more to the subject (including actual wording of deed?) than merely "considering" parents' home his second home.

FE

[Davc]

I could be wrong, but the way I've always heard it is that a person cannot deduct either mortgage interest or real property taxes unless that person is legally liable for such payments in the first place.

In your scenario, I would say the person might have a (slightly) better chance with the property taxes versus claiming any mortgage interest for someone else's loan.

I would allow property taxes with the % based on how it's titled, but to deduct the mortgage interest he would have to be the "equitable owner" which would require that he had both the benefits and the burdens of ownership.

[AccTaxMan]

I would allow property taxes with the % based on how it's titled, but to deduct the mortgage interest he would have to be the "equitable owner" which would require that he had both the benefits and the burdens of ownership.

FEDUKE404 and Davc, thank you for your opinion.

So, should I take it to mean that you disagree with what the other members said in this thread?

http://www.thetaxbook.com/forums/showthread.php?t=14604

[FEDUKE404]

Not disagreeing

FEDUKE404 and Davc, thank you for your opinion.

So, should I take it to mean that you disagree with what the other members said in this thread?

http://www.thetaxbook.com/forums/showthread.php?t=14604

I think much of the discussion in the thread you cited was related to who "paid" it out of a joint checking account (unmarried couple).

To be closer to your inquiry, there would have to be something like a joint checking account consisting of parents + child for the situation you have presented.

The title 26 cite does seem rather straightforward, however.

You did not yet address the issue of the wording on the deed. Quit claim or something similar? Such might create other (non Schedule A) issues down the road. I always defer to an attorney's opinion on those topics.

FE

[AccTaxMan]

I think much of the discussion in the thread you cited was related to who "paid" it out of a joint checking account (unmarried couple).

To be closer to your inquiry, there would have to be something like a joint checking account consisting of parents + child for the situation you have presented.

The title 26 cite does seem rather straightforward, however.

You did not yet address the issue of the wording on the deed. Quit claim or something similar? Such might create other (non Schedule A) issues down the road. I always defer to an attorney's opinion on those topics.

FE

Once again, thank you for your reply.

If you are talking about the definition of a 'second home', I think the definition is very straight forward and kind of loose too.

According to publication 936:

"Qualified Home

For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.

The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and is not deductible.
Main home. You can have only one main home at any one time. This is the home where you ordinarily live most of the time.

Second home. A second home is a home that you choose to treat as your second home."

So, according to the definition, I can't see any reason why the son cannot treat the home of his parents as his second home. They didn't mention anything about the wording of the deed.

[Lion]

"Your Debt"

Your quote did include the phrase "your debt." It doesn't sound as if the debt is your taxpayer's. It sounds as if the debt is his parents' even though the house might be partially his.

[taxmom34]

i have a question. how does one get a loan when the title is in another's name?

[Davc]

FEDUKE404 and Davc, thank you for your opinion.

So, should I take it to mean that you disagree with what the other members said in this thread?

http://www.thetaxbook.com/forums/showthread.php?t=14604

Not necessarily. In that case she is an equitable owner.