Can I deduct mortgage interest on a co-signed loan if my name isn't on the deed?

This is an interesting situation that many co-signers find themselves in! The answers depend on some specific details: For the mortgage interest deduction: Generally, you can only deduct mortgage interest if you're legally liable for the loan AND have an ownership interest in the property. Since you're a co-signer, you're legally liable, but without being on the deed, you don't have the ownership interest component. So unfortunately, you typically can't claim the mortgage interest deduction in this scenario. Regarding the gift tax question: Yes, payments made directly to the lender on behalf of your sibling that exceed the annual gift tax exclusion (currently $17,000 for 2023) would technically be considered a gift. You would need to file Form 709, but that doesn't necessarily mean you'll owe gift tax. It just counts against your lifetime exemption. Whether you chose to pay or were forced to pay doesn't affect the mortgage interest deduction, but it could potentially impact the gift tax situation. If you were legally obligated to pay as a co-signer because your sibling defaulted, there's an argument it might not constitute a gift.

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I was skeptical when I first saw the recommendation for taxr.ai above, but I decided to give it a try since my situation with co-signing my son's mortgage was causing me major headaches when preparing my taxes. I have to admit I was impressed! I uploaded my loan documents and the system quickly identified that while I couldn't take the mortgage interest deduction, there were other options. Since I was using part of the property occasionally for business meetings (with my son's permission), I could legitimately deduct a portion of my payments as a business expense instead. The service also generated a perfectly formatted explanation for the gift tax reporting that saved me hours of research. It walked me through exactly which boxes to check on Form 709 and how to properly describe the situation. My accountant was impressed with how thorough the documentation was. Definitely worth checking out if you're in a complicated co-signer situation!

If you're trying to contact the IRS to get an official determination on your co-signer mortgage interest question, good luck! I spent 3 weeks trying to get through to someone who could give me a definitive answer about my similar situation. After waiting on hold for hours multiple times, I finally discovered Claimyr (https://claimyr.com) and it changed everything. They have this callback service that somehow gets you through the IRS phone maze - you can see how it works in this video: https://youtu.be/_kiP6q8DX5c. I was skeptical, but within 45 minutes, I had an IRS agent on the phone who walked me through the exact documentation requirements for my co-signed loan situation. The agent confirmed that without an ownership interest, I couldn't take the mortgage interest deduction, but they helped me understand exactly how to report the payments on my gift tax return and even gave me specific guidance on how to document that my payments were due to legal obligation rather than gifts in certain circumstances.

I need to apologize for my skeptical comment above. After continued frustration trying to get clarity on a similar co-signed mortgage situation, I reluctantly tried Claimyr last week. I was absolutely shocked when I got a call back with an actual IRS agent on the line in about 2 hours. The agent was able to review my specific situation with the co-signed loan and confirmed exactly what documentation I would need to prove which portions of my payments were legally required versus which would be considered gifts. She even emailed me specific internal guidance they use when reviewing these cases. This saved me from potentially filing incorrectly, as I was planning to try claiming the mortgage interest based on some questionable advice I'd found online. The agent explained that without ownership interest, that deduction would likely trigger an audit. Instead, she helped me understand how to properly document everything on Form 709 with specific notations that would clearly explain my situation. Sorry for doubting - this service actually delivered!

I work at a tax preparation office and see this co-signer situation fairly often. Here's what most people miss: While you generally can't deduct the mortgage interest without being on the deed, you should carefully check if there are any exceptions that might apply in your specific case. For instance, if you can document that you have an "equitable ownership" interest despite not being on the deed, you might qualify. This could apply if you have a written agreement with your sibling about partial ownership or future ownership transfer, or if you've been paying property taxes and insurance directly. Another option: if you're paying because your sibling defaulted and you're legally obligated as co-signer, you might be able to claim a bad debt deduction in some circumstances. This is complex territory though, so document everything meticulously.

Something important that hasn't been mentioned yet - even if you can't deduct the mortgage interest, make sure you're tracking these payments carefully for potential future tax benefits. If your brother eventually sells the house at a profit, your contributions could affect the calculations. Also, have you considered refinancing so you're added to the deed? That would solve the deduction problem going forward, though it might trigger transfer taxes depending on your state. Another option might be drawing up a formal loan agreement between you and your sibling, which could potentially convert some of your payments into loan interest that might be reportable differently.

One thing I don't see mentioned yet is the potential state tax implications. While federal law is pretty clear about needing both legal liability AND ownership for the mortgage interest deduction, some states have different rules or additional deductions that might apply to your situation. For example, some states allow deductions for property taxes paid on behalf of family members, or have specific provisions for co-signers who make payments due to the primary borrower's financial hardship. Since you mentioned your brother lost his job and had medical issues, this could potentially qualify as hardship in certain states. I'd recommend checking your state's tax code or consulting with a local tax professional who knows your state's specific rules. The federal restrictions don't necessarily mean you're out of options entirely - there might be state-level benefits you can claim even if the federal mortgage interest deduction isn't available. Also, keep detailed records of which payments went to principal vs. interest vs. escrow (taxes/insurance). Even if you can't use the mortgage interest now, this documentation could be valuable for other tax situations down the road.