If parent transfers house to me, how can I get mortgage tax deduction?
October 4, 2008 11:32 PM   Subscribe

Can I get the mortgage tax deduction if a parent transfers their house to me and I begin paying the mortgage without going through an actual sale and real estate agent/commission process?

Basically a parent wants to give me their house without going through an actual sale (money changing hands) so that I can take advantage of the mortgage tax deduction on the house. How can we accomplish this?
posted by KimikoPi to Work & Money (5 answers total)
IANATA. Nor do I know anything about this.

But AFAIK if the mortgage is not assumable (few are these days) you will have to pay off the old mortgage and get a new one in your name. To facilitate this you should look into bridge financing, perhaps, to help you pay off your parent's loan while working on lining up your own loan.

Once you have a lender with a secured Trust Deed on the property to whom you are paying interest, then you can go to town with the mortgage interest deduction.
posted by troy at 11:46 PM on October 4, 2008

Also, you don't need to involve real estate agents in this transfer. This can be done by a real estate attorney, by the hour.

Believe it or not, Realtors® do not operate in any official capacity. They have inserted themselves into the process but are completely ancilliary.
posted by troy at 11:51 PM on October 4, 2008 [1 favorite]

Since I'm in a learnin' mood, here's what the IRS says:

You must be legally liable for the loan. You cannot deduct payments you make for someone else if you are not legally liable to make them. Both you and the lender must intend that the loan be repaid. In addition, there must be a true debtor-creditor relationship between you and the lender.

The mortgage must be a secured debt on a qualified home in which you have an ownership interest. “Secured debt” and “qualified home” are explained later.


a) you have to be on the title
b) have to sign loan papers
posted by troy at 11:54 PM on October 4, 2008 [1 favorite]

I can speak to the certitude of troy's statement that a Realtor is not in any way required to transact real property, although you (as he says) will need to retain the services of a real estate attorney. I Am Not Anything For Which I Would Need To Disclaim Myself, but I'd imagine if you call around and find an attorney who's dealt with this situation before (it can't be that uncommon), you'll be able to sort it out without too much hassle.
posted by baphomet at 6:56 AM on October 5, 2008

IANAL but it seems to me that if your parents give you the house without a sale, then they also need to consider the tax implications of the gift. If you owned the house you could sell it or kick them out or whatever. As troy's second comment says, it may be enough to be added to the title as a co-owner (you would still need an attorney to write out the details of what that means). Since your parents are still on the title, you might ask the bank if you can be added as a co-signer on the existing loan. Getting a new loan may be tricky right now. However, if you do take ownership of the home, I disagree with troy's first comment about needed a bridge loan since you can just delay the transaction until you are ready and the old loan gets paid off as part of the transaction. In California, title companies normally coordinate the process of getting money in and giving it out so everything can be done more or less at once.
posted by metahawk at 10:11 AM on October 5, 2008

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