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My question is about tax deductions (Mortgage Interest.

Mortgage Insurance premium & Real...
My question is about tax deductions (Mortgage Interest. Mortgage Insurance premium & Real Estate Taxes) that can be deducted by two, unrelated people, who own a house together.The two unrelated owners received a 1098 in both their names, but only showing one person's SSN.In actuality, I am the person whose SSN was not shown on the 1098 and I contributed all the funds toward the payment of the mortgage interest, the mortgage insurance premium and the real estate tax.Can I itemize, claim the entire deductions and make the following entries on Schedule A:Line 6: The entire amount of the Real Estate taxes paid
Line 11: The entire amount of the home Mortgage Interest paid (line 11, because I did not receive a 1098 with my SSN)
Line 13: The entire amount of the Mortgage Insurance Premium paidAnd attach a statement for the above lines identifying both owners, their SSN(s) & the property location and stating that the owners agreed that all the funds for the Mortgage Interest, the Mortgage Insurance Premium and the Real Estate taxes were contributed by me and, therefore, I will be the only one to claim those expenses. I will also state that I will include the interest on the Escrow Account on my return and the other owner will not itemize.My concern is will that be sufficient for the IRS to accept that I paid all those expenses, or will they challenge it? Would they
require additional proof? if so, what might that be?Will the IRS accept that, even if the monthly mortgage payments were made from a common checking account?
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Answered in 12 minutes by:
4/9/2017
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,286
Experience: Taxes, Immigration, Labor Relations
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If there are two co-owners - each may deduct a part of the interest he/she paid.

Or they may negotiate HOW to apportion that deduction.

But the same expense may NOT be deducted twice.

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Customer reply replied 8 months ago
When you say the owners may negotiate how to apportion that deduction, what exactly does that mean? Incidentally, I am talking Mortgage interest, mortgage insurance premium and real estate taxes, not just mortgage interest.
Can they agree that one made all the payments and will deduct everything (as in my example and I mentioned attaching the statement) If so, then it is only deducted once by me and the other owner will not itemize at all. As I asked, will the IRS accept that or will they challenge it?

That is correct - co-owners may agree on how to split deductions.

That is acceptable by the IRS.

The only issue is that form 1098 is issued using one owner's SSN.

The IRS might question mortgage interest deduction when there is no form 1098.

In this case we need to provide supporting document regarding the ownership.

That would be sufficient.

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Customer reply replied 8 months ago
Does the fact that both names are ***** ***** the 1098 sort of prove that both people are the legitimate owners ? I had been told that the 1098 always shows just one SSN ?
(I was also wondering if the IRS actually gets the SSN of both people whose names are ***** ***** 1098, even though the 1098 shows only one SSN ?)

1.

Please see IRS publication 936

https://www.irs.gov/pub/irs-pdf/p936.pdf

page 2

You can deduct home mortgage interest if all the following conditions are met.
-- You file Form 1040 and itemize deductions on Schedule A (Form 1040).
-- The mortgage is a secured debt on a qualified home in which you have an ownership interest
.

So far - ONLY these two conditions are required to deduct mortgage interest.

.

Another issue with IRS verification procedure...

Routinely - the IRS verifies if taxpayers correctly report mortgage interest deduction.

So if deduction doesn't match whatever is reported on form 1098 - the IRS might send a letter asking for supporting documents.

So that is a separate issue not directly related to eligibility.

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Customer reply replied 8 months ago
Lev, I am sorry I didn't get to view your response earlier, but I was away.
I have read Pub 936 and the instructions for Schedule A a number of times and am aware of the rules as to who may deduct house related expenses (Mortgage interest, Mortgage Insurance Premium and Real Estate Taxes). I have no doubt that We qualify to deduct those expenses.
The reason I contacted you was to get your professional opinion, based on your experience in this field, as to what the IRS will agree to and what they may challenge.
To summarize my understanding of what you stated earlier, the IRS will accept the two owners negotiating how to apportion these expenses, even to the point of one owner itemizing and claiming all the deductions and the other owner not itemizing (taking standard deduction).
We received a 1098 with both owners names on it but only one owner's SSN (I am told that is always the case). What makes this a bit different is that I am the person whose SSN was not shown on the 1098 and I contributed all the funds toward the payment of the mortgage interest, the mortgage insurance premium and the real estate tax.
What I would like you to re-confirm, based on the earlier discussion, is that the IRS will accept me itemizing and claiming all the expenses and the other owner (whose SSN is shown on the 1098) not itemizing and thus not claiming any of those expenses.
I intend to show the mortgage interest in line 11 of Schedule A (because I didn't get a 1098 with my SSN) rather than line 10 and I will attach a statement that both owners agree that I contributed all the funds toward those expenses.
I realize that the IRS may ask for proof that I am indeed a legitimate owner, but I am hoping that because my name appears on the 1098, and because of my explanation in the statement I attach, the IRS will be satisfied that I am one of the owners.
Again, my concern is that the IRS not object to me claiming all the expenses, I am not really worried about proving I am one of the owners.
Lev, this is quite a lengthy response. Please read through it carefully and advise whether you think I am on solid ground.Thank you,
Joe

Hi Joe,

If we are talking about eligibility - there are two conditions to deduct mortgage interest (1) you paid it and (2) you have ownership interest in that property.

There is any requirements for other co-owner to itemize or not and there is no requirements to have form 1098 in your name or in your SSN.

As long as these requirements are satisfied - you ARE eligible to deduct mortgage interest.

The form 1098 comes in effect because of IRS verification. And it is possible that the IRS will question your deduction because form 1098 is not reported with your tax ID. So 1098 and your tax return will not match in the IRS system.

But that makes NO difference in your eligibility.

You are still eligible.

If you are attaching a note with explanation of facts and reasoning - that may help to prevent additional questions form the IRS.

Please do not write a large note with many details - that might add confusion.

But regardless - you are eligible for that deduction.

You may attach a copy of 1098.

Lev
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Customer reply replied 8 months ago
Lev, Thank you for your help and advice. It took a while to guide the conversation to my exact concerns but I am completely satisfied with your input and would recommend you to others. Thanks again.Sincerely
Joe
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