My son and his girlfriend purchased a home together. They will each be filing tax returns as single taxpayers.To claim the mortgage interest deduction, is it necessary for both of them to claim half interest in the home on their federal taxes, or can one of them claim all the interest on the home and the other not claim any interest? If it is possible for one of them to claim all the interest, do they need to continue to claim it this way in the future? Is it possible for them to alternate claiming this interest?
I assume your son and his girlfriend are jointly liable for the mortgage (if the loan is only in one party's name, only that person can deduct interest paid on the loan). So the deduction question turns on how much interest each of them paid. If your son paid all the interest, he gets the full deduction. If the girlfriend paid half, they should split it 50/50.
Unmarried couples can arrange things to get the most out of this deduction. Say, for example, one of them pays all the mortgage -- to capture the entire interest deduction -- while the other agrees to pay the utility bills and buy the groceries (nondeductible items) and claim the standard deduction if that's higher than the total of his or her qualifying deductible expenses. They should just keep notes with their tax filings showing the breakdowns, just in case the IRS ever asks.
If both your son and his girlfriend will claim some of the interest on their 2004 separate returns, the one whose social security number is not on the 1098 form from the mortgage company should send a copy of the form with his or her return, along with an explanation that he/she is claiming part of the interest.
GETTING STARTED
