question regarding tax deduction for joint owner

[softvirgo]

What is the name of your state? California

Me and my wife lives in a home. When we bought this home couple of years ago we were not having good credit so my sister in law helps us to buy the house. So the loan and title is on her and my wife's name. My sister in law is primary in loan and even we get 1098 from lender with her social security number. Even though it include's my wife's name also.
For the whole year we made the payments from our bank account which is on mine and my wife's name.

Now this year we earn a little bit more and this puts us in a higher tax bracket. we want to deduct the whole interest as a tax write off. My sister in law agreed to it .

question:

Is it possible that we can get all paid mortgage interest to be deducted from our gross income?

Please suggest

Thanks

[FlyingRon]

Is it possible that we can get all paid mortgage interest to be deducted from our gross income?

It looks like yes. Your wife is liable for the mortgage interest and paid the interest and it is a qualified property.


[url]http://www.irs.gov/publications/p936/ar02.html#d0e749[/url]

[tranquility]

The owner who pays the interest is the owner who gets to deduct it.

[softvirgo]

checking account which is on mine and my wife's name only. We had setup a bill pay and every month payment goes automatically from our accounts

[FlyingRon]

Yes, that is fine.

Tranq: The "owner" who pays only qualifies if they are eligible. The sister would not be eligible for the deduction even if she paid it.

[tranquility]

Tranq: The "owner" who pays only qualifies if they are eligible. The sister would not be eligible for the deduction even if she paid it.

Unless this is the sister's third house and not the one she designates, I don't see why not. Are we talking about an equitable ownership issue? Is it a qualified residence issue? What do you mean?

[FlyingRon]

Originally Posted by tranquility

Unless this is the sister's third house and not the one she designates, I don't see why not. Are we talking about an equitable ownership issue? Is it a qualified residence issue? What do you mean?

Because it isn't a qualified residence if she never lives there.

[tranquility]

But, her *sister* lives there. The residence is qualified.

At Code Sec. 163(h)(4)(A):

(A) QUALIFIED RESIDENCE

(i) IN GENERAL

The term "qualified residence" means--

(I) the principal residence (within the meaning of
section 121) of the taxpayer, and

(II) 1 other residence of the taxpayer which is
selected by the taxpayer for purposes of this
subsection for the taxable year and which is used by
the taxpayer as a residence (within the meaning of
section 280A(d)(1)).

Per Code. Sec. 280A-(d)(2):

(2) PERSONAL USE OF UNIT

For purposes of this section, the taxpayer shall be deemed to have used a dwelling unit for personal purposes for a day if, for any part of such day, the unit is used--

(A) for personal purposes by the taxpayer or any other person who has an interest in such unit, or by any member of the family (as defined in section 267(c)(4)) of the taxpayer or such other person;

Code Sec. 267(c)(4):

(4) The family of an individual shall include only his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants; and

And, at the Regs at 1.280A-1:

(e) PERSONAL USE OF DWELLING UNIT.

(1) GENERAL RULE. For purposes of this section and sections
1.280A-2 and 1.280-3, a taxpayer shall be deemed to have
used a dwelling unit for personal purposes on any day on
which, for any part of the day, any portion of the unit is
used--

(i) For personal purposes by the taxpayer or any other
person who has an interest in the unit;

(ii) By a brother or sister (whether by the whole or
half blood), spouse, ancestor or lineal descendant of
the taxpayer or of any other person who has an interest
in the unit;

[FlyingRon]

OK you got me....