Minimizing Your Taxes and Managing Your Complex Affairs

Tax Tips, Finance Tips, Fun Events

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Paying a Mortgage? Watch Out For This Tax Trap.

Just because you pay a mortgage doesn't mean you are allowed a tax deduction.

In Jackson v. Comm'r, T.C. Summary 2016-33, the Tax Court determined that a taxpayer was not entitled to mortgage interest deductions for payments he made toward the mortgage on his girlfriend's house. The court found the taxpayer did not hold legal title to the property, was not obligated to make the mortgage payments, and did not have equitable or beneficial ownership of the property.

A Tax Court Summary position basically is used when the law is clear and the only issue is the taxpayer's fact pattern.

In general to deduct mortgage interest: (a) the mortgage must be yours (2) primary or second residence and (3) deduction is limited to acquisition debt up to $1 million (or $750,000 for homes purchased after December 15, 2017).

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Richard Pon CPA, CFP