From: Cypress, CA
Dear TaxMama,
Hello and thanks in advance for answering this question.
I'm moving in with my girlfirend this month and will be making her mortgage
payment.
Its a stretch for her to continue paying it.
I sold my home a little over a year ago, as I strongly feel the housing market
(especially on the coasts) is in bubble teritory and is likely to retrace over
the next few years.
I would like to take the mortgage interest deduction since my income is in
excess of $200,000 and hers is $40,000.
I'm worried that since the 1098 will be in her name and SSN that I would
be ineligble for this deduction.
Your thoughts?
Thanks,
Bruce
Hi Bruce,
Cypress, California, eh?
Yes. I agree that prices are ridiculous.
When a house in Pacoima goes for nearly $400,000, you know the market is
nuts. So, yes, you're probably right to sell off and hang on to your money.
Although, selling last year was premature. You've missed about 20% appreciation
that still took place in 2004.
However, this thing with trying to deduct your girlfriend's mortgage? It
ain't gonna happen.
She's got to really love you and trust you for this to work.
Why? Because the only way to legally get this deduction is for you to be
on title AND to be liable for the mortgage.
She must be willing to add you to the title. Which, frankly, I would never
advise anyone to do until they've been married for at least two years.
And to get you liable for the mortgage? Well, that can be done by having
you sign a loan document holding you liable for payments of X dollars, etc.
And, since you're not related, it ought to be recorded.
She will have to report a sale of part of her personal residence - which
won't be taxable for up to $250,000 worth of profit.
The good thing is, if she does do this, and her home continues to increase
in value for the next two years, when you both sell it, you'll have a $500,000
personal residence exclusion on the house.
So, you two work out whether this is a permanent relationship or not.
And either way, have your girlfriend meet with a good local tax pro and
perhaps an attorney, to get some objective advice - without you.
Trust her to love you enough to seek advice to help make this work, rather
than to put obstacles in your way.
If you need a referral, I am sure that I can recommend good folks out that
way.
Best Wishes,
Eva Rosenberg, MBA, EA
