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Old 03-17-2015, 12:24 AM
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How to account for Parent's Home when I get the 1098

Hi All!

Thanks in advance for taking a moment to read this.

Here's my tax scenario:

I am just completing my 2014 Returns. I get a 1098 (Mortgage Interest Paid) on my parents home. I qualified for the mortgage for them and they legally own and pay all mortgage payments on the property.

Because I'm the borrower on the bank loan, the 1098 comes to me. My parents use the 1098 as a deduction, since they can paper-trail that they make ALL the payments (beneficial owners).

How do I account for it on my return, being that the IRS and State see that a 1098 was issued to me and will question how my gross income suffices to pay such an expense mortgage? My income does not support that of the 1098 figure.

If I leave it off of my return all-together, would this be the correct method of handling such a scenario?

THanks



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Old 03-17-2015, 02:20 AM
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I am just completing my 2014 Returns. I get a 1098 (Mortgage Interest Paid) on my parents home. I qualified for the mortgage for them and they legally own and pay all mortgage payments on the property.Because I'm the borrower on the bank loan, the 1098 comes to me. My parents use the 1098 as a deduction, since they can paper-trail that they make ALL the payments (beneficial owners)How do I account for it on my return, being that the IRS and State see that a 1098 was issued to me and will question how my gross income suffices to pay such an expense mortgage? ========= in general, you’re not allowed to claim the mortgage interest deduction for someone else’s debt. They re legal owners of the home and pay the entire mortgage,they can claim the full amount of mortgage interest if they itemize on Sch A .Your parents must have an ownership interest in the home to deduct interest on a home loan. This means that their names/ name have to be on the deed or they have a written agreement with the deed holder(s) that establishes they have an ownership interest. For example, a parent who buys a home for a child that is in the child's name alone cannot deduct mortgage interest paid on the child's behalf, as they do not own the home.
you said your parents legally own and pay all mortgage payments on the property, then, they can deduct the interest expenses aslongas they are responsible for the payments.

Note; The IRS allows only the actual owners of a property to claim tax deductions for that property. For example, someone else besides you could be paying your mortgage and property taxes but won't be able to claim deductions for those payments. Property ownership deductions also stay with property owners even when they don't reside on or live in those properties.


My income does not support that of the 1098 figure. If I leave it off of my return all-together, would this be the correct method of handling such a scenario?=======>>>>>>>Correct ; you can not deduct the mortgage interest expenses paid by your parents who are responsible for the mortgage payments. In order to claim the mortgage interest deduction, you must have an ownership interest in a qualified property and be responsible for a secured debt.To deduct mortgage interest expenses, your parents necessarily need to itemize deductions on Sch A of 1040, if not then no they can’t.



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Old 03-17-2015, 02:56 AM
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Thanks for taking a moment to share that information. I have clearly understood your recommendation.

My follow-up question is: Do I/Should I, include some type of letter of explanation to the IRS and State with my returns explaining this 1098 issue?

Otherwise, both the IRS & State will receive my return and question, "Why was his 1098 not listed in his return when we've received from the Mortgagor a 1098 issued?"

Thanks!



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Old 03-18-2015, 03:58 PM
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Originally Posted by [email protected] View Post
Thanks for taking a moment to share that information. I have clearly understood your recommendation.

My follow-up question is: Do I/Should I, include some type of letter of explanation to the IRS and State with my returns explaining this 1098 issue?

Otherwise, both the IRS & State will receive my return and question, "Why was his 1098 not listed in his return when we've received from the Mortgagor a 1098 issued?"

Thanks!
My follow-up question is: Do I/Should I, include some type of letter of explanation to the IRS and State with my returns explaining this 1098 issue?===Why not? You may do that as there is no penalty in informing them on your personal tax related info. However, you do not have to becasuse if they enter their mortgage amount on Line 11 of Sch A of 1040, listing the name and identification of the lender, then the IRS/your state Dept of Revenue’d take care of it.

Otherwise, both the IRS & State will receive my return and question, "Why was his 1098 not listed in his return when we've received from the Mortgagor a 1098 issued?"======>>>>>> lenders only mail the form to the first borrower listed. Although only one borrower receives the 1098 form, you can split the interest on your returns aslongas you both paid and file separately(even this is not your case).



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