I got divorced in October 2017, but we had bought a house in February 2017. My name is still on the mortgage, but we are in the process of getting my name off. I'm wondering if I have to put the mortgage on my taxes or how that works since I have not been paying it.
There are many factors that would need to be clarified before we could provide an accurate answer for your specific situation. Below, I have made some assumptions to provide some guidance, but you should consult with a professional to review all the specifics of your situation.
You have not stated who lives in the home, but I will assume it is you. I will also assume your divorce is final. Furthermore, I must assume that you have no divorce agreement concerning this property or you would have mentioned that fact. A divorce decree often requires one or the other spouse to make mortgage payments.
Starting with prior to your divorce, if you were the primary borrower, you were legally obligated to pay the debt and make the payments, so you would be entitled to take the mortgage interest deduction in this instance.
After the divorce the mortgage is treated differently.
In Pennsylvania, the home now is considered owned as tenants by the entirety, and not joint tenancy. You now each have a direct and separate 50 percent interest.
You must have the home as your principal residence to deduct any interest. A divorce or separation agreement must be in place to determine who shows the property as their principal residence. Someone “moving out” does not count. In the absence of the agreement, no one takes the deduction.
If your former spouse must make mortgage payments by divorce decree and you live in the home, you must count one-half of the payments as alimony income but may still deduct half of the mortgage interest paid on the home, as long as it remains jointly owned.
If the home is not your principal residence (you don’t live there), you do not pay the mortgage, and there is no divorce decree, you have no tax treatment.
For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.
Answered by: Sean J. Brennan, CPA, is president of Brennan and Company CPA PC in Philadelphia.