Results 1 to 4 of 4
  1. #1
    Join Date
    Feb 2009
    Posts
    1

    Default Who Claims Real Estate Taxes when Filing Taxes for Co-Owned Property

    I live with my mother and the house is just in her name. She was going to put my name on the deed for the house so I could take out a home equity loan to pay off some bills I have and also so I could claim the interest from the loan for when I file my taxes. She asked her accountant about this and he said it was not a good idea because if both of our names our on the deed, then we will need to split the claiming of the taxes paid on the house. She needs to claim the taxes herself.
    Is it true that if two names are on the deed, that you have to split the amount of the taxes when we file or can one person claim the entire amount? I do not pay anything for the taxes, she does. Thanks.

  2. #2
    Join Date
    Jul 2007
    Location
    Florida
    Posts
    2,344

    Default Re: Who Claims Real Estate Taxes when Filing Taxes if 2 People on House Deed

    The person who actually pays taxes that are levied on them and that they are legally obligated to pay is the person who should deduct those taxes on their federal income tax return. If you paid the tax, you should deduct it. If you did not pay the tax then you are not entitled to deduct it, regardless of whether your name is on the deed or not.

  3. #3
    Join Date
    Mar 2008
    Posts
    1,995

    Default Re: Who Claims Real Estate Taxes when Filing Taxes if 2 People on House Deed

    I have bought owned, lived in, rented out, and sold real estate properties owned with relatives where one person may have made the entire down payment, both parties are on the deed, and then only ONE of them taking the entire deduction for taxes.

    There is a short answer and a long answer to this issue.

    First the short answer. When the issue first came up for me almost 30 years ago, CPA's would ask me, "when they ask whose SS# to use to report interest payments on the bank 1099, did you put your number down, or your mom's"?? The answer was: "It's my SS# down". So I'm told, OK, you should be able to take the entire interest deduction with no problems.

    Presumably, your mom took out the mortgage and the 1099 for interest is issued to her, and her name, only.

    I lived in a property where my mom-in-law's name is also on the deed, and I took the entire interest deduction. She told us the deduction is of no use to her as she owned her own home, paid up, and the interest deductions exceeded her SS and pension income.

    Now the longer answer.

    I studied Real Estate accounting some years back and the professor, also a CPA, was asked the same question: "can someone take the entire interest deduction and yet have someone else's name on the deed as well. The answer was yes, if structured as follows:

    The parties whose names is on the deed should have a partnership agreement written up stipulating:

    - The percentage owned by each, which could be different than the percent down payment. Mom can put down 100% and then gifted you 50%. You can also write ownership percentages onto a deed, which I have done on one property.

    - The percentage of income allocated to each, i.e if there is rental income.

    - The percentage of deductions to be taken by each, which includes mortgage interest, water, sewer charges, property taxes and so forth.

    - The allocation of sales proceeds when the property is sold.

    I was told technically, the maximum/minimum allocation is 1%/99%, meaning the person agreeing to take all the interest deductions can only take 99%. I don't exactly recall the reason for this.

    To make allocations per the "partnership agreement", one should first file a 1065 parthership return prior to the filing personal 1040. In other words, if the entire mortgage deduction is $10,000 for the entire partnership, consisting of you and your mom, the allocation of 100% to your mom would then be made by way of the "K-1" within the 1065, and then entirely to your mom on the 1040.

    The idea here is the you and your mom can deduct $10,000 between the two of you, but the partnership agreement gave her the whole 100%.

    However, we have thru the years, taken the shorter route, taking the position that my SS# is reported via the 1099, and then I take the entire deduction.

    There is one complication NOT doing a 1065 though. I had to sell a rental property where mom's name was on the deed, and I took all the mortgage and expense deductions, and depreciation through the years. We have to do a cost basis for the sale, and the CPA said "oh, oh. I have trouble doing it, because according to the deed, it's 50/50, and and everything was done 100/0 through the years. I said to him "I guess it would had been simpler had we done some partnership returns too. He answered "yes".

    Anyway, the way it was finally done was the sale was reported entirely on my returns. His take is the IRS actually received more taxes due to my higher tax bracket and consequences of the AMT. His take is the IRS usually has no problem if something resulted in a higher tax. And then on the closing documents it was reported via a 1099 to me only, so taking the profit entirely on my return would not have raised any red flags anyway.

    Oh, is the IRS going to have a problem I took all the money, reporting it on my taxes only?? A CPA/attorney advised me to handle this problem by placing the entire proceeds into a joint bank account with mom's name on it as well, but 1099 to me. In other words, we both owned the house, sold it, and put the monies in a joint account.

  4. #4
    Join Date
    Oct 2006
    Posts
    16,474

    Default Re: Who Claims Real Estate Taxes when Filing Taxes if 2 People on House Deed

    Quote Quoting Steelers61
    View Post
    I live with my mother and the house is just in her name. She was going to put my name on the deed for the house so I could take out a home equity loan to pay off some bills I have and also so I could claim the interest from the loan for when I file my taxes. She asked her accountant about this and he said it was not a good idea because if both of our names our on the deed, then we will need to split the claiming of the taxes paid on the house. She needs to claim the taxes herself.
    Is it true that if two names are on the deed, that you have to split the amount of the taxes when we file or can one person claim the entire amount? I do not pay anything for the taxes, she does. Thanks.
    The rule when it comes to mortgage/home equity interest and property taxes is that 1) you must be obligated to pay the interest/taxes, and 2) you must have actually paid them.

    If you and she are joint owners of the property, and you have taken out a mortgage/home equity loan against the property, and you make the payments, then you are entitled to take the deduction for the interest.

    If you and she are joint owners of the property, then you are both obligated to pay the taxes, and if she is the one who actually pays the taxes, then she is the one who is entitled to the deduction for the taxes.

    If both of you split the payments for the mortgage and taxes, then you are each entitled to take deductions for a proportional share of those expenses, assuming again, that you are both equally obligated to make the payments.

    1. Sponsored Links
       

Similar Threads

  1. Local Taxes: Property Taxes and Reassessment of Inherited Real Estate
    By TaxHelpNeeded in forum Tax Law
    Replies: 9
    Last Post: 02-17-2016, 08:27 PM
  2. Replies: 3
    Last Post: 02-04-2016, 04:49 PM
  3. Local Taxes: Mixed Use Property Real Estate Taxes
    By pilotx in forum Tax Law
    Replies: 1
    Last Post: 04-12-2010, 08:57 AM
  4. Taxes from Sale of Real Estate
    By october20052005 in forum Tax Law
    Replies: 1
    Last Post: 04-21-2006, 07:09 AM
  5. Real estate taxes for a flipper
    By cdttax in forum Tax Law
    Replies: 2
    Last Post: 11-22-2005, 01:21 AM
 
 
Sponsored Links

Legal Help, Information and Resources