You don't have to live in a house to write off mortgage interest on your taxes. Mortgage interest on your vacation home or a rental property is deductible, for instance, even though you live elsewhere. If, say, your parents or your co-borrower pay the mortgage, however, it's unlikely you'll qualify to claim the deduction for your own.
The IRS says you can't claim mortgage interest unless you have an ownership interest in the house. If, say, your parents bought the house and pay the mortgage, it doesn't matter whether you live there or not. You don't own it, so you have no right to the deduction. Even if you made the down payment, giving you a share of ownership, if your parents pay the mortgage they can't just give you the deduction.
Having a Stake
If you have an ownership claim to the house but you're not paying the mortgage, it's a gray area. The Santa Clara Law School website notes that the IRS has no hard-and-fast rules for how to divide up the mortgage interest between co-borrowers. The website says the safest tax move is the obvious one -- whoever pays the interest takes the deduction. If you're not paying, you're out of luck again.
If the person paying the mortgage is your spouse and you live in a community property state, you may be able to claim at least some of the mortgage interest. Community property laws split everything down the middle: income, debts, assets. if you and your spouse file separate returns, you combine your community income, which is most of what you earn in the marriage, and then each report 50 percent. Even if your spouse pays the mortgage, you can therefore claim half the mortgage-interest deduction your taxes.
If you continue to co-own property with your ex after you split, the right to the tax deductions is something you should work out in the divorce agreement. If your ex ends up paying the mortgage, it's possible you can still get at least 50 percent of the write-off. If the home post-breakup is the sole property of your ex, however, he's the only person who can take the mortgage interest deduction, even if you still live there.
- Internal Revenue Service: Home Mortgage Interest Deduction
- Double Taxation: Parent Buys House, Kid Pays The Mortgage. Who Gets the Interest Deduction?
- Santa Clara Law: Shared Home Ownership: Who Gets to Take Interest and Property-Tax Deductions?
- DlKLawGroup: IRS Recognizes Community Property Law in California for Registered Domestic Partners
- Stout Risius Ross: The Taxing Side of Divorce Negotiations
- Consumer Financial Protection Bureau. "What Is Private Mortgage Insurance?" Accessed Oct. 31, 2020.
- Internal Revenue Service. "Publication 936 (2019), Home Mortgage Insurance Deduction." Accessed Oct. 31, 2020.
A Durham, NC resident, Fraser has written about law, starting a business, balancing your budget and fighting evictions, among other legal and financial topics.