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?
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.
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