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Tax Talk with George Saenz

Ask the tax adviser

Splitting mortgage-interest deduction

Dear Tax Talk:
My boyfriend and I are considering buying a house together. My name will not be on the mortgage, but I will be paying half the mortgage payments each month. He is willing to let me claim half of the mortgage interest on my taxes, but since I am not on the mortgage, I am wondering if this is legal?

Dear Sasha:
The answer to your question is that you're eligible to claim the mortgage interest deduction even though you're not on the mortgage. But my advice to you is that you would be better off not splitting the mortgage interest deduction.

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Generally, to claim an interest deduction you have to be liable on the debt. However, when property is secured by a mortgage, a special rule provides that an equitable owner can claim the deduction for interest paid. You're an equitable owner if you would suffer a loss of property upon default. For example, you would lose the home if you both stopped paying the mortgage.

However, now that I told you could have it as a deduction, let me tell why you might not want to.

Mortgage interest on the house is an itemized deduction. Itemized deductions are claimed in lieu of the standard deduction that all individuals are entitled to claim. If your boyfriend claims all the interest which, for illustration, let's assume is $10,000, he'll get a deduction for that amount and you will get the standard deduction, which in 2001 is $4,550. Your combined deductions will be $14,550. But if you split the interest deduction, each of you will get $5,000 in deductions or $10,000 in total.

You don't need me to tell you that you're better off getting $14,550 in deductions instead of $10,000.

-- Posted: Oct. 4, 2001

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See Also
Making the most of itemized deductions
Don't overlook the tax breaks of home mortgage points
More stories on getting a mortgage
Tax breaks for non-itemizing taxpayers


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