Every year, your mortgage lender sends you a Form 1098 showing how much mortgage interest and mortgage insurance premiums you paid. If you split the mortgage with a friend, sibling, parent or partner, you still only get one Mortgage Interest Statement. Unless you made 100 percent of the payments, you don't get to claim 100 percent of the tax write-off. The mortgage interest tax deduction will need to be divided between you and the other homeowner on the deed.
Mortgage Interest Writeoff Explained
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.
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 co-owner paid. Your co-owner 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 the extra tax 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 be responsible for specific household expenses. If you know you want a big deduction, you can pay most (or all) of the monthly mortgage payment. Your co-owner can make up for your taking on this expense in whatever way both of you agree is fair.
Exceptions to Shared Home Deductions
If, say, you're helping your daughter out financially with her house payments but you aren't the co-owner of the home or legally responsible for the debt, you're out of luck at tax time. With no ownership stake in the house, you have no claim to the mortgage interest writeoff.
If you co-own a home with your spouse and file separate income tax returns, you follow the same procedures listed above. The exception applies if you live in a community property state. In that case, you split everything right down the middle, with each of you reporting half your community income and half your community expenses. Deductions from income work the same way – if the house is community property, you each get 50 percent of the writeoff, regardless who who made the mortgage payments. Use Form 8958 (Allocation of Amounts Between Certain Individuals in Community Property States) to determine how the income and expenses will be divided for income tax purposes.
Mortgage Interest Writeoff for 2018
Under new changes to tax laws, the mortgage interest deduction will only apply to loans of up to $750,000.00. Interest on home equity loans will no longer be tax deductible on your tax return in 2019 (for income earned in 2018).
Mortgage Interest Deduction for 2017
For the 2017 tax year, you can deduct interest on a mortgage loan up to $1 million. The interest on a home equity loan up to $100,000.00 is also tax deductible.
If you have any questions or concerns about shared home deductions, consult an experienced tax professional for personalized help and advice.
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