New employer paid mortgage & RE taxes until old home sold

[MN2V]

and these payments were added to client's W-2.

Can the client put them on Sch A since they aren't moving expenses?

[ILLMAS]

If he/she was getting paid wages, and the wages were being used to pay the mortgage, it sounds the same to me, definetly a Yes from me.

[MN2V]

No, this was in addition to wages...sort of incentive pay to get him to go with their company.

[ILLMAS]

The employer is not going to deduct the expense as a mortgage or real estate expense, instead he will reported as wages, therefore it's like if the employer paid the employee and employee paid the mortgage. Worst for example if the employer paid 10K towards the employee mortage, employer reports 10K as additional wages and no federal and state deduction, employee will be on the hook for taxes on 10K basically. Perfect if the employer paid 10k for the employees mortgage, however he reported 13K in additional wages, but 3K is being used to cover the taxes on the 10K.

[JohnH]

Whether the employer grossed it up or not, it is income to the employee - no different than income used to buy a motorcycle or boat or food. The income loses its identity once the employee receives the benefit. The employee can deduct mortgage interest and taxes in the same manner as for any second residence, but that's the only deduction I can think of.

[joanmcq]

I agree with John. It appears to be a nonqualified moving expense paid for by the company. I had a similar situation this year where the new employer paid to help the home sell. Taxable wages. But in your case, it was for a deductible expense, so IMHO you should still be able to take the benefit of the mortgage interest and RE tax deductions.

[kcjenkins]

Yes, you can deduct the interest and taxes. Its been paid from his wages, after all. Just the same as if he had had an automatic payroll deduction for the payments.