Mortgage interest on Mom's loan paid by son

[Janitor Bob]

Son had bad credit and could not get mortgage loan...so mom put the mortgage in her name.  So the mortgage is in mom's name, but son lives in the home and makes the mortgage payments.  Of course the 1098 is in mom's name and SSN.  Son wants to claim that interest paid on his return.  My first though was NO...not tied to your SSN and your'e not legally liable for the loan so no...you cannot claim the interest.  But...I seem to recall a tax case where the son was allowed the deduction in a similar case...If I recall, the reasoning was that even though not in his name, he lived in the home and since not paying the loan would mean he would lose his home.

Am I so early succumbing to the pressures of the season and hallucinating or was there actually a precedent for this?

[Janitor Bob]

In this case the interest would not help the son (not enough deductions to itemize), but I found the question interesting and wondered if anybody had been able to successfully argue in favor of claiming such interest.

 

[Lion EA]

I haven't done it but seen it done with the mother & son owning the home and mother taking out the mortgage due to son's credit.  Search on Equitable Ownership.  At least one good Tax Court case about this issue.  Did the son act like the owner, paying all the bills, maintaining the home, working on his credit to be able to refinance in his name only, etc.?

[Janitor Bob]

"Equitable Ownership"...that's the term I could not think of!  I'll search on that.  I think we are referring to the same court case.  In this case, YES...son pays all the bills for the home just as if he owned it.  Again...it is not going to help this year, but It peaked my curiosity....I'd like to be better equipped with precedent in case it is needed in the future.

[kcjenkins]

Yes  "Equitable Ownership" is the key term.  And I also dealt with a case like this a number of years back.  I suggested, and they adopted the idea, to protect them both, that the mother set up an installment sale agreement.  Had them do it through their local attorney, so that if something happened to either of them they could prove the agreement, and if things changed, between them, both were protected.

[TAXMAN]

KC I thought under this arrangement that along with all the other items being paid for as a house owner tp had to pay the lender direct that it couldn't be paid to the other party and then paid to lender. I may have read it wrong though. Your thought here.

[Abby Normal]

And make sure you use line 11 on Sch A for the mortgage interest and enter the mom's name and address in section 2.

[kcjenkins]

15 hours ago, TAXMAN said:

KC I thought under this arrangement that along with all the other items being paid for as a house owner tp had to pay the lender direct that it couldn't be paid to the other party and then paid to lender. I may have read it wrong though. Your thought here.

The point is that if it's done properly, with all required paperwork,  the son IS paying his lender [Mom] and she is paying her lender.  But keep in mind, in most cases, you don't have a problem with just going the 'equitable ownership' route.  The case I mentioned had a couple of 'sensitive' issues, involving a possibility of divorce for the son, plus Mom's health, etc.