Hello everyone! I purchased a house for my parents last March!! They need another year to get their situation where they can purchase a house! I would like for them to be able to claim the mortgage interest and taxes that go along with ownership. What is the best way to do this?
Thanks
Sunny (NC)
If you bought it for them, is it not already in there name? If the house is for them then YOu could just deed them the property, im assuming your on title now. J
Thanks for responding, yes I own the property. If I deed it to them can they claim the interest and property taxes on their tax return?
<<If I deed it to them can they claim the interest and property taxes on their tax return?>>
Someone else may have more insight on this (and I could be wrong), but it is my understanding that to claim a mortgage interest deduction, there must be an OBLIGATION to pay (e.g., the mortgage holder)…the IRS takes this to mean that to claim the interest paid, the individual must be on the note.
Can they re-fi in their name or can they be added to the note?
Well, all I know is that when you take a property sub2 and you are on title then you get the interest deductions. YOu just get the 1098 at the endof the year and use it. If Sunny deeds to parents then wouldn’t it be the same scenario? If you get audited you can show that you were the actual owner of the house at the time of the deduction.
I dont know this for sure but it reasons out.
J
Here is what the IRS says on this matter
(http://www.irs.gov/publications/p936/ar02.html#d0e175):
"You can deduct home mortgage interest only if you meet all the following conditions:
-- You must file Form 1040 and itemize deductions on Schedule A (Form 1040).
-- You must be legally liable for the loan. You cannot deduct payments you make for someone else if you are not legally liable to make them. Both you and the lender must intend that the loan be repaid. In addition, there must be a true debtor-creditor relationship between you and the lender.
-- The mortgage must be a secured debt on a qualified home. “Secured debt” and “qualified home” are explained later."
The second bullet is applicable.
As for Sub2, I am sure that you sign some sort of a document making you financially liable for the loan…no?
Great posts!!! Since I last wrote I found this on h&r block’s website. It is an exception to the legal liability rule.
http://www.hrblock.com/presscenter/facts/taxfactspdf/mortgage_interest.pdf
What do you think!!
Hmmmm…
I think, based on your posts in the thread, that you (and your parents) meet neither the letter nor the intent of the exception. I could be wrong…I would give your lender a call and explain it and see if he/she ould do a modification to add your parents…
Keith