The home mortgage interest deduction lets you write off the interest on up to $1.1 million of home mortgage debt you pay each year. Just because you're a co-borrower doesn't mean you have to miss out on the deduction, even if you're not the one who receives the Form 1098 at the end of the year.
As long as both borrowers are responsible for the interest on the home, each borrower can deduct her share of the mortgage interest. Say you and your friend or significant other buy a house together. Because you're not married, you can't file a joint return and report all the interest together. Instead, you each get to report the interest that you paid during the year. For example, if the interest totals $8,000 and you each paid half, you're each entitled to a $4,000 deduction.
Borrower Without the 1098
How you report the deduction depends on whether you or your co-borrower received the Form 1098. This form shows how much interest was paid on the mortgage. When your co-borrower receives the Form 1098, you have to report more than just your share of the interest on your taxes. Report the interest on line 11 of Schedule A, write "see attached" next to it, and attach a statement showing the name, address and amount of interest paid by each co-borrower to your return.
Receiver of the 1098
If you were the one who received the Form 1098, you're got it much easier. Obviously, you still need to figure out your portion of the interest because you're only allowed to deduct your share. Once you've done that, just show your portion of the interest paid on line 10 of Schedule A. There's no need to show how much each person paid or even to list the names of your co-borrowers. Just make sure you tell the co-borrower how much he is entitled to deduct so the total deductions add up.
Just because you're eligible for the deduction doesn't mean it's always in your best interests to take it. The home mortgage interest deduction requires itemizing and giving up your standard deduction. If your portion of the interest plus your other itemized deductions, such as charitable donations or state and local income taxes, don't exceed your standard deduction, you're better off not claiming the mortgage interest paid and just taking the standard deduction.
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