Living Together - Joint Deed - Refinance dual or single - Tax Issue

[NiceGuy123]

What is the name of your state? Minnesota

Mortgage and title are in girfriends name.
She quit claimed me onto title in November.
The interest rate is 8.25%
I earn considerably more money than she does, so the tax benefits to her are not as much as for me.

We want to refinance with my credit, because I will get a better rate, which will save at least $250 per month. Since I am new on the title, I need to live there for 6 months to show vested interest. We have been told by multiple lending institutions that this is true. If we were married, it is different, but we are not.

When we refinance we have the option of both of us on the mortgage or just me. We will not be married at this time.

If only I am, will she have to be off the title?

If we both are, for taxes can I claim as an itemized deduction, all the interest paid on the new loan if she chooses not to claim any of it, or will I only be allowed to claim 50% of the interest?

 

[abezon]

1. If unmarried people are on a mortgage together, the debt shows up on each person's credit report in full; married people get only 1/2 the debt on their credit report. It's probably better to have the loan in your name only.

2. You can claim any interest you are legally obligated to pay & actually do pay. It's fine for you to claim all the itemized deductions & her to file as single & claim the standard deduction.

3. Whether she can stay on the title for refi depends on the mortgage company. You could always take her off the title, refi, then quitclaim 1/2 the house back to her.

4. Be sure you have a written, signed, notarized co-ownership agreement addressing who pays what expenses, who claims the interest, how much equity each person has to start with, & what happens if one or both of you decide to sell.

 

[shizawn]

Nc

1. If unmarried people are on a mortgage together, the debt shows up on each person's credit report in full; married people get only 1/2 the debt on their credit report. It's probably better to have the loan in your name only.

2. You can claim any interest you are legally obligated to pay & actually do pay. It's fine for you to claim all the itemized deductions & her to file as single & claim the standard deduction.

3. Whether she can stay on the title for refi depends on the mortgage company. You could always take her off the title, refi, then quitclaim 1/2 the house back to her.

4. Be sure you have a written, signed, notarized co-ownership agreement addressing who pays what expenses, who claims the interest, how much equity each person has to start with, & what happens if one or both of you decide to sell.

I live in NC and have a similar situation. My girlfriend and I are equals on the mortgage and split everything from the mortgage to the utilities down the middle. Can we split the Mortgage interest paid on the house.

 

[Snipes5]

Yes, but since you are not married, it is probably better for one of you to take all the itemized deductions (mortgage interest, property taxes, etc) and the other to take the standard deduction. There is potentially even greater benefit if one of you has children.

Both of you take all your paperwork and set up a double length appointment with the same tax professional. That way the pro can tell you how to get the most benefit for the household as a whole.

Snipes

 

[abezon]

The standard deduction for a single person is $4900 this year (I think). For head of household it's $7100. Without itemizing, your household can deduct $9800. Say your total mortgage interest & property taxes are $11,000. Now consider 3 scenarios:
(1) you each claim 1/2, you have beaten the standard deduction by a whopping $1200. Your tax savings are small.
(2) A claims all itemized deductions & B claims the standard deduction. The household's total deductions are $15,900. You Beat the standard deductions by $6100 AND the tax prep is simpler & easier.
(3) A files as head of household (this assumes there is a kid in the house & A makes more money) & B claims all itemized deductions. Total deductions are $18,100, $6100 better than the standard deductions for a S/HH combo.

Why would you ever want to choose scenario 1?

 

[NiceGuy123]

Why would you ever want to choose scenario 1?

In the original question, I was asking if I would be ALLOWED to take the full deduction. I was wondering if there were regulations prohibiting 1 party on a joint issue from taking the full deduction and not sharing it. I was asking because it seemed like it would be better for me to claim the mortgage deduction and for her to claim the standard deduction. I just didn't know if it was allowed, if we were both on the mortgage.

Since we aren't married, we will file our taxes seperately. What would stop her from filing and claiming them in full as well? Obviously this would be agianst some law, but what part about it would throw an audit red flag ?

 

[abezon]

Your question was answered in the first response.

As for audit flags, the IRS matches the mortgage interest claimed on Schedule A to the 1098s filed by mortgage companies, which have social security numbers on them. However, the chances of "double-dipping" triggering an audit are slim to none, since the computer would have to kick up a red flag & IRS would have to audit both taxpayers at the same time. If the IRS is auditing A, it can't ask about B's tax return & vice versa, so there's no way for the IRS to verify during a single audit that only one owner claimed the interest.

 

[dbellis]

[California]

Hello,
I also own a condo with my girlfriend . Both names are on the mortgage and we split everything 50/50. I have been looking for the answer to how we could still take advantage of the tax break.

My question is: Are you sure that the advice you are giving is legal? Can I really claim the itemized deduction and have her claim the standard deduction. This doesn't sound right?

Note: They only put my name and social on the Form 1098.

Anyone that is certain of this please answer. If you have a link to information that backs the legality of this, that would be super.

Thanks for your help!

 

[Snipes5]

If you are not married, your taxes are unrelated. It therefore doesn't matter whether one of you itemizes and the other claims the standard deduction, or you both itemize, or you both claim the standard deduction. It makes not a bit of difference.

Why would an attorney intentionally post something on here that isn't legal?

If you want backup, you can find it in 26 US Code. www.cornell.edu has an easily searchable site.

Snipes