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This might not be the right area to ask, if not please send me to the right one. But I have a question about tax's and owning a house. I understand that if I own a house I can deduct the % paid on the loan.

So the question is, my sister and I purchased a house 2 years ago and she has purchased another house with her new husband about 8-9 months ago. She had to lie on the mortgage and say she was living in both houses. Because part of our loan FHA loan stated that we had to live in it for X amount of time.

But she lived in our house for 8-9 months, so can she deduct that for tax's. She is still liable for the debt, but she doesn't help me pay for the house anymore. So do I apply for all the tax deductions when it comes time to do tax's.

We purchased the house in Austin TX for 130,000.00.

Thanks for the help
Michael
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This might not be the right area to ask, if not please send me to the right one. But I have a question about tax's and owning a house. I understand that if I own a house I can deduct the % paid on the loan.

So the question is, my sister and I purchased a house 2 years ago and she has purchased another house with her new husband about 8-9 months ago. She had to lie on the mortgage and say she was living in both houses. Because part of our loan FHA loan stated that we had to live in it for X amount of time.

But she lived in our house for 8-9 months, so can she deduct that for tax's. She is still liable for the debt, but she doesn't help me pay for the house anymore. So do I apply for all the tax deductions when it comes time to do tax's.


Simple answer. In order to deduct the mortgage interest and/or real estate taxes, you have to be legally responsible to make the payments and you have to actually make them. So, both you and your sister are legally liable for the taxes and mortgage. That's step one. To the extent that she paid the taxes/mortgage, she can deduct her payments. She doesn't have to live in the house. You can deduct real estate taxes for as many properties as you own. You can deduct mortgage interest on up two personal use properties simultaneously.

Ira

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Ira,

Ignoring the legally liable for the payments for a minute.

If she is paying nothing on the mortgage and the other person is paying 100% I would expect the second person can deduct the 100%. The sister would not deduct any amounts for the payments she did not make.

Correct?

John
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Ignoring the legally liable for the payments for a minute.

If she is paying nothing on the mortgage and the other person is paying 100% I would expect the second person can deduct the 100%. The sister would not deduct any amounts for the payments she did not make.

Correct?


Right. But recognize it cuts both ways. If you are paying 100% on the mortgage but your name is not on the deed and mortgage, you get to claim nothing.

Ira
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Right. But recognize it cuts both ways. If you are paying 100% on the mortgage but your name is not on the deed and mortgage, you get to claim nothing.


Got it. I was assuming (but failed to indicate) that both parties would be on the mortgage and title.

Splitting hairs, if a person is on the mortgage and makes the payment but is not on the title does anything change? What about the reverse?

Just checking as to the theory. I understand the risks when the title and the loan does not match.

John
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If your sister has lied on the FHA loan, you may be subject to a recapture for amounts that they financed under the premise that she was living there when you sell it. Good luck.
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if a person is on the mortgage and makes the payment but is not on the title does anything change? What about the reverse?

For the Schedule A home mortgage interest deduction all three of these must be true:

1. The taxpayer is liable for the mortgage payments
2. The taxpayer makes the mortgage payments
3. The loan is secured by the taxpayer's first or second home.

So, in your scenarios, the first would have a deduction and the second wouldn't, since the second isn't on the mortgage and liable for it.

Just so things don't get too clear, the opposite result is true for real estate taxes. The person not on the title isn't liable for the taxes and has no deduction. The person on the title, even though not on the mortgage, is liable for the taxes and gets the deduction.

Phil
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Phil,

Thanks. Clear to me and hope to others! Well done.

John
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