Every year, your mortgage lender sends you a 1098 showing how much mortgage interest and mortgage insurance premiums you paid. If you pay the mortgage with a friend, sibling, parent or partner, you still only get one 1098. Unless you made 100 percent of the payments, you don't get to claim 100 percent of the tax write-off. For everyone to receive their fair share requires some extra calculations.
You only get a tax deduction for mortgage interest you've personally paid. If, say, your co-owner pays 75 percent of the mortgage each month and you pay 25 percent, you can claim 25 percent of the interest and premiums reported on the 1098. There are exceptions. If say, you're helping your daughter pay for her house but you aren't the co-owner or liable for the debt, you're out of luck. With no ownership stake in the house, you have no claim on the write-off.
If your partner, say, got the 1098 instead of you, sit down and figure out how much of the interest each of you can deduct. Report your share on Schedule A. Attach a statement explaining why the lender didn't send the IRS a 1098 with your name on it and how much interest you and your partner paid. Your partner simply subtracts out your share of the payments and reports her own contribution. She doesn't send in a 1098 -- that's the lender's job.
If you make three times what your co-owner does, you may need an extra deduction a lot more than him. You can't deduct more mortgage interest than you paid, even if you need the write-off. Instead, consider taxes when you're figuring out who will pay what. If you know you want a big deduction, you can pay more or all of the monthly mortgage. Your co-owner can make up for your added expense in whatever way you both agree is fair.
If you co-own with your spouse and file separate returns, you follow the same procedures unless you live in a community property state. In that case, you split everything right down the middle, each of you reporting half your community income and half your community expenses. Deductions work the same way -- if the house is community property, you each get 50 percent of the write-off, regardless who who paid what. Use Form 8958 to divide everything up for the IRS.
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