When you were young, your parents took care of you. Now that you are grown and your parents are old, you might need to lend them a hand, both physically and financially. A portion of that help might include helping them maintain their home or even helping with the bills, such as their utilities or mortgage payment.
TL;DR (Too Long; Didn't Read)
Unless you are the legal owner of a property, you may find it difficult to deduct mortgage payments. This applies even in situations where you are helping pay for a family member's home.
Mortgage Interest Deduction
The Internal Revenue Service allows you to deduct mortgage interest on your main home and on a second qualifying home. To qualify for the mortgage interest deduction the loan must be secured by the home, and you must be liable for making the payments. If the loan is in your parents' names and you have no legal obligation to pay the loan, you can't take the mortgage interest deduction, even if you are making the payments.
Real Estate Tax Deduction
You can deduct the real estate taxes on properties you owned, provided the taxes were based only on the assessed value of the property and tax rates were charged uniformly against all property in the jurisdiction. The real estate taxes must have been imposed on you, and you must have paid those taxes during the tax year before you can deduct them. If your parents were the property owners, and you just paid the bill, you can't deduct those real estate taxes, since they were imposed on your parents, not you.
Exploring the Gift Tax
Any amount you pay for mortgage payments for your parents is considered a gift by the IRS. Gifts are not considered taxable income to the recipient, and they are not tax-deductible by the giver. You are limited in the amount you can give to any one person during the year before you are obligated to pay federal gift tax.
As of the 2019 tax year you could give each person up to $15,000. If both of your parents are living, you could give up to $30,000 per year toward their mortgage without incurring the gift tax.
Your Parents As Dependents
Although individuals can still claim their parents as dependents provided they meet a few specific standards, recent changes to federal tax law have eliminated the personal exemption. That being said, you may be able to qualify for the Child and Dependent Care Credit assuming that your parents are either physically or mentally unable to care for themselves.
Although not directly related to your mortgage payments, these funds could help offset some of your expenses. If your parents do not meet these guidelines, you will not be able to receive this credit.
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.