tax question: can i claim interest on house #2?

karin_2015February 13, 2009

Tax Question! Thanks in advance for your help!

My boyfriend and I purchased a house 8/1/2008 as Joint Tenants. The mortgage, title, everything is in both of our names. The mortgage comes out of his bank account each month through autmatic withdrawal. I write him a check for $1200 each month to pay for the mortgage, however. I am a first-time home buyer (this was the first home I ever purchased.) He already owns a house and has owned it for 11 years. We currently have both homes as we are waiting until the market rebounds before putting home #1 on the market). So this new house is his second house and my first.

He is claiming the interest on the mortgage for house #1. I want to claim the interest on the mortgage plus the $7500 tax credit for first time home buyer for house #2 (the home purchased 8/1/08.) Can I do this as the mortgage payment for both homes comes out of his bank account, yet I am paying for it via check to him every month?

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If you are part owner of the house, you are entitled to deduct the part of the mortgage interest that corresponds with the part of your ownership -- if half, then half. And your friend can deduct the other half. If you get audited, the only justification you would need to support your deduction is proof of home ownership as joint tenants and proof from the bank statement that the interest was paid. I do not believe you will be asked to "prove" that you actually personally paid the mortgage interest. The only time when such a proof would be required in an audit (I think!) is if there were suspicion of fraud, like if the total interest deducted by more than one person exceeded the actual interest paid. The IRS receives from the bank copies of the mortgage interest paid. So if the bank statment and the total deducted by you and your boyfriend are in agreement, there should be no problem.

As to your other question, about the tax credit, go to the IRS website > and do a search on "first time home buyer" or some similar term. The website is vast, and it will probably take a lot of hunting before you find document you are looking for. Read it very closely to see if it addresses your particular situation. If it does not, you can take a chance and put in for a HALF tax credit, half because only you are a first home buyer, and hope for the best. But be prepared to be questioned on it, and be prepared to pay back the credit, if it was given to you, plus interest. Alternatively, you could call the IRS 800#, and ask your question. In my limited experience, the answer you get depends on your luck. You might get someone who knows the code well and can give you a helpful, informed answer. OR, you might get someone who will read to you verbatim the wording in the code that you yourself could get from the website. Don't forget the IRS code is very complicated, so complicated that even tax experts make mistakes.

    Bookmark   February 13, 2009 at 12:19PM
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Whose SSN is listed on the mortgage interest 1098 received from the bank? If it's you boyfriends it still doesn't mean that you can't claim the mortgage interest, but it does mean that your BF will have to report the interest expense then back it out as reported by your SSN.

Assuming the house you both purchased was over $150,000. Then you should be able to claim the full housing credit.But be advise you have to repay that money back over the next 15 years. Starting in 2010 you'd be paying $500 in extra tax for 15 years. It's not a credit really, it's an interest free loan.

    Bookmark   February 13, 2009 at 12:53PM
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It is his SSN that is on the 1098. I will do like you suggest and claim the interest expense once he backs out of it.
I have been trying to follow the Economic Stimulus plan and read the revisions discussed on Wed and looks like you are correct that it would be a $7500 interest free loan (for me) as we purchased the home 8/1/08. It seems to suggest that the new bill will give a $8000 tax credit (NOT needing to be repaid) to people who buy a home in 09.
Thanks for your help!

    Bookmark   February 13, 2009 at 12:58PM
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I already am claiming the mortgage interest on my current home. I have recently bought another house as an investment and would like my daughter to occupy it and pay the mortgage, insurance and property taxes.

How could I give her the right to claim the mortgage interest without transfering title to her?

    Bookmark   April 16, 2011 at 12:16PM
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