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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
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Experience:  15years with H & R Block. Divisional leader, Instructor
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I and a friend have an equally shared mortgage on a home. Unknown

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I and a friend have an equally shared mortgage on a home. Unknown to me, I was listed as the primary borrower, which made me the 'payer of record'. All mortgage interest is reported under my social security number. However, my friend and I each claim 1/2 of the interest as a deduction. The IRS recently asked for clarification from my friend, because they did not receive a 1098 for the 1/2 interest my friend claimed. When I asked the bank if there was anyway to list both of us on the 1098 form, they said that was not legal--and to ask our accountant how to handle the splitting of the deduction issue. My questions are...is there any way the bank can legally alter how they report the interest we pay--or is there anything we can do when we make our respective deductions to assure the IRS that we are each entiled to half the interest deduction? Again--can a bank list more than one social security number on a 1098? How do two co-borrowers each claim half the interest deduction on a shared mortgage when the interest is reported for only one social security number? Can we each claim any fraction of the interest so long as the two fractions do not exceed the total interest paid? Thanks for detailed answers or solutions to this issue.
Submitted: 1 year ago.
Category: Tax
Expert:  Anne replied 1 year ago.
HI

Thank you for using justanswer.

In order for your friend to be able to claim their share mortgage interest, they should:


  • include your name and address as the person who did receive Form 1098
  • write a note explaining that they're an owner of the property even though their name isn’t on the mortgage
  • show how much of the mortgage interest each of you paid

You might want to include a copy of the purchase agreement that shows both of your names also.

 

However, one of the best ways to prove that your friend share expenses for the home, would be to be able to show the IRS that your friend wrote separate checks for their respective shares, and keep a journal including check numbers, and if possible, canceled checks. It's important to be able to prove your contribution in the event of IRS questions or other legal challenges.

 

 

I truly hope this information is helpful but please do not rate until you are satisfied. If you want to click on 1 or 2 just click on the continue to work with me button instead. You will then be able to add any other info or respond to what I have posted so far. Rating 3-5 gives me credit and a good rating but you can still converse with me.

Customer: replied 1 year ago.

Thanks, XXXXX XXXXX already knew this information. My friend's name apears on the 1098--along with mine, but the interest is reported only to my SS#. You did not answer legal queston about banks and 1098 reporting. Are you suggesting that every year my friend has to file a copy of the 1098 along with an explanation of how the interest is divided with her tax return? You did not answer if we can each take other than equal shares of the interest deduction so long as the total does not exceed the total interest. If you can not answer the questions as asked, that is fine-- but you really have not provided any expert knowledge. I already know what you told me. Please read my questions again. Answer, if you can. Otherwise, thanks, XXXXX XXXXX thanks.

Expert:  Robin D. replied 1 year ago.

Hello and thank you for using Just Answer,
The IRS sets the requirements of what information they require in a situation like yours.

For your friend:
If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Show how much of the interest each of you paid, and give the name and address of the person who received the form. Deduct your share of the interest on Schedule A (Form 1040), line 11, and print "See attached" next to the line. Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040),
line 13. Yes, each and every year.

For yourself:

Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. Let each of the other borrowers know what his or her share is.
You did not answer if we can each take other than equal shares of the interest deduction so long as the total does not exceed the total interest.
Anne did mention that you were to "show how much of the mortgage interest each of you paid", this equates to mean that you are only to show the true percentage that you each paid. If that is equal fine but if one of you paid more than the other, you should only each report the amount of interest that you paid. No, you cannot split it any way you choose.
The 1098 filing requirements instruct the bank (or other issuer) to list the SSN of the first person on the loan. The bank is not bound to report anyone else's SSN because as stated above, the IRS has specific procedures for reporting interest if someone does not receive a 1098.
As far as any legal reasons under Illinois law that forbids the bank further would fall under legal as it does not have relevance to tax issues.

Another expert wanted me to advise you on the following:
What I do in this type of situation is report the full 1098 on the payee's return. I also report Nominee to XXX-XX-XXXX with a negative of the amount allocated to the other party. On the other party's return I report Nominee from YYY-YY-YYYY for the amount allocated. This way the IRS can trace the allocations.

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7428
Experience: 15years with H & R Block. Divisional leader, Instructor
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