Ability to deduct mortgage interest on schedule A?

Question

My brother and I plan to purchase a property 50/50. I am to live in the home and pay my brother rent for his half. Will i be able to deduct my half of the mortgage interest as a personal expense on Schedule A?

Answer 1

If you buy the property and both of you are on the deed and mortgage, then you can deduct the mortgage interest and RE taxes that you actually pay.

In order for your brother to claim his portion of the mortgage and RE taxes, he has to charge you the fair rental value for his half of the property. If he doesn't then he has a rental activity not for profit. He can only claim the expenses up to his income.

When he sells his half (even to you) he must recapture the depreciation allowed or allowable and pay capital gain if applicable.

Answer 2

only if you are on the NOTE

Answer 3

your name would have to be on the mortgage - paying rent won't cut it and if you are splitting a mortgage between 2 tax returns, each person individual total itemized deductions would have to exceed their standard deduction to get any additional tax benefit

Answer 4

no

Answer 5

If your name appears on the mortgage, then yes.  If the mortgage will only be in your brother's name, then no.

If you are paying rent to your brother (as opposed to you paying your half of the mortgage), then it sounds like he will get to write off all of the mortgage interest (and property taxes, and possibly Mortgage Insurance).  At the same time, he will have to include your rent payments as rental income (on Schedule E).  But any expenses to maintain the home may be written off.

Answer 6

In order to deduct the mortgage interest, you have to be legally responsible for the mortgage (your name must be listed as one of the debtors).  The amount you can deduct on Sch A is how much you actually pay towards the mortgage.  If you give your brother a check and he cashes it and pays the entire amount, this will be fine.  I'd put "morgage" on the check and keep photocopies of cleared checks for backup just in case.

For RE taxes, your name has to be on the title of the home.  Whatever RE taxes you actually pay is deductable on Sch A.

However, if you are paying your brother "rent", then you can not deduct the rent and your brother has to file a Schedule E claiming the rent.  This is not the best thing to do normally.

I recommend having the person with the higher income pay the mortgage and RE taxes and claim the whole thing themself.  The other person can take the standard deduction.  This often results in less tax liability overall.  The person with the lower income can pay all the other bills and maybe gift some money to the one paying the mortgage.

Example:

Let's say morgage interest for the year is $7,000 and RE taxes is $3,000.  Let's also say that each of you have $2,000 of other Schedule A write-offs...for example, state income taxes paid.

If you go 50/50, then each of you will write off $7,000 on your schedule A.  $10,000 divided by 2 = $5,000 + $2,000 = $7,000.

If one pays for Mortgage and RE, then they claim $10,000 + $2,000 = $12,000.  The other person only has $2,000 to claim, so they will take the standard deduction of $5,450.  Together, you will be deducting $17,450 whereas by going 50/50, you only deducted $14,000.  This causes an additional deducton of $3,450 which can save $863 in taxes (if the payer is in the 25% bracket).  Not bad for a slight modification in paying bills.  Plus, it is perfectly legal.

(Extra: So, let me get this straight.  You are buying a house with your brother 50/50.  You are going to live in both halves of the house.  You are going to pay half the mortgage and RE taxes for the 1/2 you own, and you will pay your brother rent for his half...correct?

You will be able to write off the mortgage and interest you pay on your half of the house, but you will not be able to write off the rent you pay your brother (obviously).  On the other hand, your brother will be an owner of 1/2 of a house that he will rent out to you.  He will file a Schedule E showing the rent he collects from you, while depreciating the 1/2 house over 27.5 years and writing off the mortgage interest, RE taxes, repairs, and whatever other expenses he incures on that 1/2 of the home.  Now that I think about it, this doesn't sound like a bad idea.  Good luck to you two!)

Answer 7

You can deduct the half of the mortgage interest and real estate taxes that you actually pay (not the rent for your brother's half), assuming that you are on the mortgage and on the title.

Answer 8

You are fine.  It will be easier to do this if the 1098 shows your SSN and name.

It's your brother who is going to have more difficulty deducting his portion as he will have a not-for-profit rental activity.

Answer 9

idk