Partner not on loan, can write off interest?

Question

Hi -

My domestic partner and I are trying to work out shared equity in the house that I own.  We are working with a lawyer to draw up paperwork that would phase in percentages of ownership for her over a period of time.

However, there's also the question of writing off the interest.  My bank says we can't add her to the loan without refinancing, and we don't want to refinance.  My accountant believes that if we file the legal contract we are preparing and get it on record, then that will allow us to divide the interest write-off between us, even if her name is not on the loan with the bank.

Has anyone else tried this?  I trust my accountant, but it would be reassuring to hear a second opinion on this.

Thanks!

Matt

N/A N/A · Answer

Thanks!  I will talk to the accountant some more about it.  Sounds like we're covered either way.

Account Closed · Answer

Matt,

I believe the answer is simpler than you think.

The interest deduction comes from making the interest payments. It is not directly tied to being on title. There are people who pay on loans where they are not on title.

Ask the accountant to check. I suspect all you need to do is document that the interest was paid by the other person. Similar to how All Cash documents it or just check stubs.

John Corey

Frank Adams · Answer

I've owned 5 mortgaged houses with people other than my wife. Even though the loans were in my (and my wife's) name we took 1/2 the interest and the other couple took 1/2. I don't recall what paperwork we did, IIRC we just sent the other owner a copy of the 1098 and they included that with their 1040 attached to the form ??? (2037??? on which they took the expenses for the rental house.

Never had a problem.

all cash