Can my fiancée take the full mortgage and tax deduction for our home if her name is not on the mortgage?

by Rosemary Lamaestra, CPA, CFE | Jan 21, 2019

My fiancée and I purchased a house together in June 2015. Her name is on the house title but not on the mortgage itself since her credit score was much lower than mine. I pay the $2,000 monthly mortgage out of my personal checking account, and she pays the utilities and might give me an additional $1,000 or $2,000 throughout the year. In the past she would take the tax deduction while I took the interest deduction since it was close to evenly split (around $9,000 each). Now, with the increased standard deduction, it doesn’t make sense to split it up anymore since each half is less than the new $12,000 standard deduction. My question is, can my fiancée take the full mortgage and tax deduction even though she is not on the mortgage? Is she considered “legally liable” for the loan? What is your interpretation of IRS Publication 936?

According to Reg.1.163-1, “Interest paid by the taxpayer on a mortgage upon real estate of which he is the legal or equitable owner, even though the taxpayer is not directly liable upon the bond or note secured by such mortgage, may be deducted as interest on his indebtedness.” Your fiancée is one of the legal owners of the home (you mention her name is on the deed) even though she is not responsible for the mortgage payment.

However, the person that is paying the mortgage is the one entitled to the interest deduction. Likewise, property taxes are deductible by the person who paid the taxes. If the taxes are escrowed with the mortgage payment, then the percentage paid by each of you would be deductible by that person. You cannot take a deduction for something that you did not pay.  

Based on the question, it appears that you pay the majority of the monthly payments and you would be entitled to both the property tax and mortgage interest deduction for what you paid. Your fiancée would then receive the new standard deduction of $12,000.

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Answered by: Rosemary Lamaestra, CPA, CFE, is a manager with RLB Accountants in Allentown, Pa. 

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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