Partners Buying a Home

June --

I have a partner, and we are buying a house together. We are both going to be on the loan. I have been making in excess of $110,000 the last couple of years, and she is only making around $70,000. Can the mortgage interest deduction be split according to the amount that she or I pay?

I thought I had read that it could be split 50/50, but I make more than she, and she can take head-of-household/child credit deductions depending on the tax year as a settlement of her divorce. I know of "joint tenants with right of survivorship," but I am not sure how to go about this. Are there better alternatives? Should I be listed first on the mortgage since I make more and could potentially take the entire deduction?

Dee
Ohio


Dear Dee,

A home purchase may be the biggest financial transaction of your life. There's a lot more to it than who gets to deduct the mortgage interest and real estate taxes. When purchasing jointly with someone who is not your spouse it is important to have everything spelled out in a legal document. What happens if one of you dies? If one is unable to work and not share expenses? If one chooses to leave the relationship? Should you have insurance to cover such situations?

You need to go over all of these possibilities with an attorney.

Here's a very quick wrap up on ownership. This info is not in lieu of your talking with an attorney. It's meant to give you a starting point.

Tenants-in-common ownership:
-- deduct taxes and interest by the percent of ownership
-- if one dies her % goes into her estate
-- the survivor keeps her %

Joint-tenants with right of survivorship:
-- deduct taxes and interest by whoever pays them
-- if one dies, all belongs to the other; there are tax consequences

Enjoy your new home!
-- June