Mortgage Interest Deduction and non-employment

[Ahappymel]

Hi all,
Question for you:

After my baby is born, I will be at home. I am a property owner, it is solely in my name.
My partner will be the sole provider for a while..we are not legally married (we do not file jointly) so we cannot use it as a deduction jointly.
Someone told me that I do not need to have income earned from work in order to file taxes to get my mortgage interest deduction but this doesn't make sense to me. It seems that I would need to have an AGI...and a minimum at that.
Can you offer input?

Thanks!-Mel.

[Herausgeber]

That mortgage interest deduction will be of no use to you, because you won't be earning any income that would need to be offset by a deduction, which is how it works.

I'm sure you have your reasons for keeping them separate, but basically, the only way that deduction would be of any use to your family without getting married is if you added your partner to the title as well.

Of course, depending on how much the itemized deductions are, they still might not be of any use to you if the amount is less than the standard deduction.

[Ahappymel]

I wonder what the minimum amount I'll have to earn would be to take advantage of the deduction?
I can do a little doula work during the first year (not much but maybe enough to supplement the household and still optimize our options).

[Herausgeber]

How much are your itemized deductions worth? Then compare that to your standard deduction. The higher number represents a chunk of your income that won't be subject to federal income tax. If you claimed the kid, you might be eligible for the earned income credit if your income fell into the right range, but that might not be enough to offset the higher taxes your partner would have to pay since s/he would lose the deduction for the child, which I presume s/he would have taken as the person supporting the child financially. Your partner may also be able to claim you as a dependent as long as your income is under a certain amount.

You might want to consider meeting with a financial planner or tax accountant to work out your options. You've got a lot of moving parts here.

Also, I'm really surprised your partner is comfortable with a financial arrangement in which s/he will be responsible for paying the mortgage on a property s/he has no ownership stake in. It's like the worst of both the renting and owning worlds, from that person's perspective. And from your perspective, you're completely legally responsible for the mortgage and property, but have no steady income to make the payments. If something were to happen to your partner, you could be in a serious bind. Again, I'm suspect you have a good reason for wanting to avoid doing this, but the fastest solution to your problem, IMO, would be to quitclaim a portion of ownership of the property to your partner. It could be as little as 1 percent, but in fairness, I would calculate the percentage based on how much equity their payments have created.

[Ahappymel]

Originally Posted by Herausgeber

Also, I'm really surprised your partner is comfortable with a financial arrangement in which s/he will be responsible for paying the mortgage on a property s/he has no ownership stake in. It's like the worst of both the renting and owning worlds, from that person's perspective. And from your perspective, you're completely legally responsible for the mortgage and property, but have no steady income to make the payments. If something were to happen to your partner, you could be in a serious bind. Again, I'm suspect you have a good reason for wanting to avoid doing this, but the fastest solution to your problem, IMO, would be to quitclaim a portion of ownership of the property to your partner. It could be as little as 1 percent, but in fairness, I would calculate the percentage based on how much equity their payments have created.

Long story short, we cannot merge assets/credit for the best financial health of the family. There is defaulted student loan in the picture. Giving my partner a quitclaim (putting property in their name too) might make the property subject to collections.
I don't really need advice about this issue though.
Thank you for the insight : )

[Herausgeber]

I figured there was a good reason, which is why I prefaced that the way they did. I suspect that the need to keep things financially separate may by definition cost you the benefits of that deduction, though. But a professional could help you run all the scenarios.

[Ahappymel]

I believe my mortgage interest was like $7000 last year so I assume (but as you said, will contact a tax person) that I have to earn at least that to take the deduction).