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A question about mortgage deduction: if person A helps

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person B take a loan...
A question about mortgage deduction: if person A helps person B take a loan to help this person B buy a primary residence, who gets the right to deduct the mortgage interest for tax filing? Person A makes the mortgage payments.
Submitted: 9 months ago.Category: Tax
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8/28/2017
Tax Professional: emc011075, Tax adviser replied 9 months ago
emc011075
emc011075, Tax adviser
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Satisfied Customers: 3,780
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Hi. My name is ***** ***** I will be happy to help you.

Can you be more specific? Who owns the primary residence? Both or only B? Who took out the mortgage? Is the mortgage secured by the B's primary residence? If A stops paying the mortgage, what he is going to loose?

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Customer reply replied 9 months ago
A took the mortgage; B has the title.
Tax Professional: emc011075, Tax adviser replied 9 months ago

Ok. How A secured the mortgage? By how own property? Or the loan is unsecured?

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Customer reply replied 9 months ago
mortgage is secured by B's property.
Tax Professional: emc011075, Tax adviser replied 9 months ago

If B does not make the payments and A does not have a financial interest in the property neither of them can take the mortgage interest deduction. To deduct mortgage interest "The mortgage is a secured debt on a qualified home in which you have an ownership interest."

A secured debt is a loan that is secured by a real property so in case you default the bank can foreclose and take the house as collateral. If he defaults on the loan person A will not loose anything, the bank takes person B's house. And that's the reason why A does not qualify for the deduction. Obviously, B does not qualify either because he is not legally required to make the payments but mostly because he does not make the payments.

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Customer reply replied 9 months ago
In the case that B is also on the loan and makes full monthly payments, I suppose B can claim the tax deduction, correct? In this case, the only role of A is to help B qualify the loan by co-signing the loan, since B does not have enough income to qualify the loan by himself.
Tax Professional: emc011075, Tax adviser replied 9 months ago

If B is on the loan and makes the payments than yes, he can take the deduction.

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Tax Professional: emc011075, Tax adviser replied 9 months ago

Any questions? Is there anything else I can help you with today?

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