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June 7, 2019
Question

Can I claim mortgage interest deduction if my name is not on the mortgage or deed but I paid all the payments and live at the house with my brother. We are 50/50 owners

  • June 7, 2019
  • 3 replies
  • 0 views

We originally bought the house together and both our names were on the mortgage and deed.  However, after refinancing we took my name off the mortgage and deed in case I wanted to buy another home. That never happened.  We have always lived at the same house.  The last two years I've paid the mortgage payments.  However, since my name is not on the deed or mortgage can I claim the mortgage interest deduction? We consider ourselves 50/50 owners even though my name isn't on the deed or mortgage.

    3 replies

    Employee
    June 7, 2019

    The short answer is no. You must pay the mortgage and be an owner of the property.

    There is a doctrine called constructive ownership where someone who does not own in name, can be treated as an owner.  You would have to take the deduction, get audited, and then go to tax court and argue your case.  The rulings I have read go both ways and depend on the exact facts in each case.

    The case I remember best is a man, who was a recent immigrant, whose brother bought him a house since he did not have a credit rating.  The man lived in the home, performed all work, paid all the bills, and acted as the owner in every significant way, with the plan of refinancing in his name as soon as he could.  The IRS denied the deduction but the tax court ruled in favor.  Another case involved a man who moved in with his elderly father and began paying all the bills.  Since the man expected to inherit the house, and meanwhile was acting in every way like the responsible owner (paying all bills, etc.) the IRS denied but the tax court allowed.

    However in other cases the tax court has ruled against the taxpayer.  It is specific to every circumstance.

    Here your argument could be weakened by taking the home out of your name in preparation of moving out.

    But in any case, taking the mortgage interest deduction means risking an audit and a trip to tax court to argue your case.  The black letter rules say you can't.

    Employee
    June 7, 2019
    However, the owner can deduct the mortgage interest even though you pay it, if you treat the mortgage payments as a gift from you to that person.  That would allow someone to get the benefit.
    Employee
    June 7, 2019
    From a legal standpoint, you are not an owner. This could negatively impact you if your brother dies before you do. Please see a lawyer.
    Carl11_2
    Employee
    September 11, 2020

    The last two years I've paid the mortgage payments.

    That doesn't matter. Since your name is not on the mortgage, you do not have a legal obligation to pay it. Since your name is not on the deed, you do not have a legal obligation to pay property taxes either. So you also can't claim property taxes.

     We consider ourselves 50/50 owners even though my name isn't on the deed or mortgage.

    The IRS would most likely consider exactly the opposite, since physical action was taken by you, voluntarily, to divest yourself of any legal obligations to the property by removing your name from the deed, as well as the mortgage.

    Your brother, the actual legal owner, can claim the mortgage interest and property taxes though, regardless of who may have paid it, since he is the only one legally obligated to pay it.

     

    Employee
    September 11, 2020

    @Carl11_2 wrote:

    The last two years I've paid the mortgage payments.

    That doesn't matter. Since your name is not on the mortgage, you do not have a legal obligation to pay it. Since your name is not on the deed, you do not have a legal obligation to pay property taxes either. So you also can't claim property taxes.

     We consider ourselves 50/50 owners even though my name isn't on the deed or mortgage.

    The IRS would most likely consider exactly the opposite, since physical action was taken by you, voluntarily, to divest yourself of any legal obligations to the property by removing your name from the deed, as well as the mortgage.

    Your brother, the actual legal owner, can claim the mortgage interest and property taxes though, regardless of who may have paid it, since he is the only one legally obligated to pay it.

     


    @Carl11_2 there are two different taxpayers here.  @appzguy is the thread starter, probably a couple years ago, who lived in the house with his brother.  @FuzzBuzz is the taxpayer who says they paid the mortgage for 6 years and inherited the house from their friend.  

    Carl11_2
    Employee
    September 11, 2020

    Thanks @Opus 17 I completely missed that. This is exactly why users need to start their own threads. Now this thread has conflicting information in it, which makes it basically wrong now. (sigh!)