Claiming the Tax Deductions on a House With Multiple Names on the Deed
If you pay most of the deductible expenses, you get most of the tax savings.
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When you co-own a house, you get to divide up expenses -- but then comes the challenge of dividing up tax deductions. You can divide up most expenses equally, or based on how much of the property you own, but with deductions, the tax law limits your options. You have to get it right to keep the IRS happy.
Married Couples
If you're married to your co-owner and file a joint return, no problem. You and your spouse claim the deductions together. If you live in California or one of the other community-property states and file separate returns, you each have to report 50 percent of community income and community expenses on your returns. Even if your spouse pays all the property taxes and mortgage interest, you're entitled to claim half that write-off.
Not Married
Outside of community property, the usual tax rule is that you can only claim deductions for your own expenses. If you or one of your co-owners pays all the mortgage payments and property taxes, she can probably claim all the write-off. If you make 25 percent of the payments, you get a quarter of the deduction. How much of the house you actually own doesn't matter: what counts is what you pay.
Rental Property
If you're a co-owner of rental property, you have many more tax deductions to take. Repairs, maintenance, mortgage interest, insurance and most other expenses are deductible. As co-owners, you report your share of rental income on your taxes: if you own 30 percent, you report 30 percent of the rental income. That doesn't entitle you to 30 percent of the tax deductions. If you only pay 10 percent of expenses, that's all you can write off.
Considerations
It's important you and your co-owners work out financial issues in a way you're all satisfied is fair. You can't allocate deductions to the person who needs them the most but you can allocate payments. For example, if two of you want to split the deduction, you can take turns making the mortgage payments. On a rental property, one person can pay property taxes while another pays for repairs. As long as you follow the law, you can make any arrangement that works for you.
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Writer Bio
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.