Another joint ownership question

[Daryn81]

Me and my girlfriend have purchased a house together. Since we are not married we will be both filing single (although we do share joint finances and are both on the mortgage). I'd like to collectively maximize our deduction(s).

I realize that if we each take half of the interest deduction for ourselves, that will decrease the total amount that our itemized deductions exceed our standard deduction.

In other words - if one of us claims all the interest (and other qualified deductions), and one of us claims the standard deduction, together we will accumulate a bigger tax refund than if we both split the deductions.

So my question is how should we determine who claims the interest on the mortgage (and other deductions), and is there anything in the tax code that dictates what percentage of the total we each should claim? Does what we each claim this year lock us in to that methodology in future years, or is each year independent as far as who can claim which expense?

 

[tranquility]

If you are both owners, you each claim the amount you paid. (In deductible interest.)

 

[Daryn81]

Tracking the amount we each paid is subject to interpretation. We each put money into a joint account and the expenses (and mortgage) get paid from that joint account. So determining the amount of the "joint" money paid to any particular item that originally came from myself v. my girlfriend is a matter of accounting methodology.

For example, we could say the $xxx that I deposited into the joint account went strictly towards the payment of all the non-deductible items, while the $xxx that she deposited was used to pay the mortgage interest and other deductible items...or visa versa...or any variation that would benefit us the most.

So I want to know if there is something in the tax code that dictates our method of accounting (for example: if I make 45% of the amount of total deposits to the joint account, then I am entitled to no more that 45% of the qualified deductions that were paid from that account)...do those such restrictions exist in the code or are we free to design our own methodology? If we use a particular methodology one year, are we free to re-design it the next year?

 

[FlyingRon]

You're free to allocate the interest payment in whatever proportion you want in this case. You can change it from year to year.

 

[tranquility]

If you have not property accounted for who paid the interest (While there are many accounting areas where it is a matter of interpretation, this is a matter of fact and not interpretation.), I would allocate the interest deduction according to the ownership percentage. (If joint with right of suvivorship 50%) It is by a complex thread to weave where either could take the deduction per the amount paid in your circumstance and you may fail at a couple of steps with your facts. Also, the commissioner needs to approve of any change in accounting, so your plan of looking at the facts at the end of each year to determine the best way to report things wouldn't work.

See a tax professional to advise further.