MFS - Who actually qualifies to get the Prop Taxes and Mortage Int?

[miatax]

1040 - MFS - I have a repeat client and most years they split the taxes & home interest in half and reflected that way on the 1040s.

In 2007 he paid taxes & interest so accordingly he took the deductions. In 2008 what if she paid for the taxes and he paid all the interest? Is this acceptable and would it raise any red flags?

The property is under his name alone so the 1098 is directed to him.

Let me know.

Thanks.

[Lion EA]

There have been court cases allowing exceptions for beneficial ownership issues, but that's not your question. You have to be legally liable to make the payment and actually make the payment to deduct the payment. If he owns the property but she makes the payments and they file MFS, then no one gets a deduction. That said, certainly they've agreed in the past. Do they put funds into a joint account to pay for joint living expenses? That would give them more flexibility to divide deductions they both qualify for after the fact when they see who would benefit. As long as one of them is not reporting a number higher than was reported on a 1098 in that one's SSN, then how could there be flags. If only one owns the property, then you get into nominee situations or you do raise red flags? Have you discussed the advantages and disadvantages of MFS vs. MFJ with them lately?

[miatax]

In prior years, I have explained the difference to them, but they have wanted to keep their records separate. They have CD's together but their checking accounts are not joint. I need to really find out who paid the interest and who paid the taxes.

If they both live in the same one property, I don't see why she wouldn't be able to claim the tax payment after confirming she made it, but I may be wrong. I guess as long as one takes the deduction (in other words, the deduction is not duplicated) then it's ok??

[Lion EA]

She has to be legally liable for the payment, as well as make the payment, to deduct the payment. She can give him the money to make the payment if he is liable for it; then he can deduct it. Are not both names on the deed and the mortgage?

[miatax]

The mortgage only shows him on it. Not sure about the deed.

[Lion EA]

Sometimes only one name prints on the 1098 but both are on the mortgage. You'll have to ask your clients. Or, explain the rule to your clients and have them tell you who qualifies to take the deduction -- in writing. Is this couple divorcing, or just filing separate?

[miatax]

They are not divorcing. They are just MFS but I will adivse them to go MFJ.

[Lion EA]

Or, to make payments from joint accounts or to keep payments matching ownership of asset or...

[joanmcq]

If payments are from joint accounts you are supposed to allocate based on the funds put into the joint account. I disagree with the ownership issue; it depends based on state law, but she is probably a beneficial owner. Now, if they filed joint and she paid the mortgage from her separate account would you deny them the deduction because he did not pay and she is not responsible? Maybe i look at things differently since I'm in a community property state, but if you would not deny the deduction if filing joint, I don't see how it would be an issue filing separate.