• FreeAdvice has a new Terms of Service and Privacy Policy, effective May 25, 2018.
    By continuing to use this site, you are consenting to our Terms of Service and use of cookies.

Mortgage Interest & Property Tax Question

Accident - Bankruptcy - Criminal Law / DUI - Business - Consumer - Employment - Family - Immigration - Real Estate - Tax - Traffic - Wills   Please click a topic or scroll down for more.

J

jenson

Guest
Hi, I am in CA.

My fiance and I are paying the mortgage and property tax on a townhouse we acquired in 7/00. The loan is under another person's name. The title is also on this person's name, although we do have the title in our names, we just have not filed it with the county yet. Before we got into this, I think the loan officer gave us false information. He said that only one person can file their tax return and claim the mortgage interest & property tax, didn't matter who it was.

When we went to file our tax return for Year 2000, I was told by an tax preparer that only the person who is on the loan can claim the interest and property tax for that home. Also, this person was not going to file any tax return at all for their own reasons. It would have been easy from the beginning if he did file and turn around and pay us back for the refund from taking the deductions for the interest and property tax.

So for the tax Year 2000 and 2001, we did file in our names and took the deduction for the mortgage interest and property tax. We have copies of all cancelled checks to prove that we paid directly to the mortgage company and county and not to the person who's name is on the loan.

I just want to know what to expect from of us doing this. What should have been the correct response from that loan officer?
 


J

J. Ducaine

Guest
generally speakingm your loan officer is correct. if you run, manage, and otherwise agree with the person under the loan, to deduct the expenses of the property then you're okay. the 1099-INT will come from the bank to the borrowers tax i.d. however, if called into question you would merely prove that you are properly claiming deductions to the property using your proof. this is not uncommon as partnerships can be formed to acquire property using someone elses credit. then, the partnership claims all of deductions of the property and files accordingly. so long as the other party, the borrower, does not cause any trouble for you by filing and deducting the interest, taxes, etc themselves, then you should be fine.
 
J

jenson

Guest
Another question

We did have an agreement with this person who's name is on the loan. His only role was to get the loan for us but we would be responsible for all mortgage and property tax payments. The next question I have is that I filed taxes using Turbo Tax this year. It asked if the 1099-INT was in someone else's name. When I said yes, it ask for that person's name and address. I only had his name and SS#. I kind of panicked and went back and filed as if it was in my name only. We receive all mail pertaining to the house, so I am pretty sure he is not going to file and claim the mortgage interest and property tax. But as far as me stating that the 1099-INT was in my name, is that another problem I have to worry about? This was before I knew I could claim it myself (from what you said).
 
J

J. Ducaine

Guest
generally, i wouldnt worry too much about the details. i have had the irs question this exact situation with clients of mine, here's what happened: 1st, the irs sends an information request via mail, questioning the interest deduction; 2nd, we sent back a letter, in response to the information request explaining exactly what our situation was - that someone else secured the loan for us and that we (our client) made all of the payments. in your case, if this happens it would not hurt to send a letter to the irs and also attach copies of your payments (checks) and any other proof. as a note, remember that this arrangement is acceptable for tax purposes, but it is probably a violation of the loan covenants with the lender; however, one should not have any bearing on the other. just keep your evidence ready (in your tax file) for each and every applicable year, as if you thin you are going to be audited; this way you are always prepared.
 
J

jenson

Guest
Thank You

This takes a load off my shoulders. And this information I am getting from you is because you are an accountant, tax preparer and you are well informed? I have already filed my taxes electronically, and I did not send copies of the checks. But I will have it ready when they send me a letter. We did not get one yet for the year 2000. Will I eventually get one or only if I am audited?
 
J

J. Ducaine

Guest
i am an accountant. also, the chances are slim that you will even get an information request from the irs, based on our discussions. by the way, an information request letter IS an audit; it's just less formal because the money involvled does not warrant a visit from an auditor. after all, the potential tax they'll recoup relative to the cost of their auditors wages do not justify an onsite audit.
 

Find the Right Lawyer for Your Legal Issue!

Fast, Free, and Confidential
data-ad-format="auto">
Top