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Can I deduct the interest I am paying on my late husband's loan ( Bank is still listing loan under his social security number)

Bedford, MA |

My husband passed in 2007 , leaving a loan he incurred 8 years before we married in 2000. Collateral for the loan was the mobile home which he left to me & which is my home. ( the will has been probated) I have continued to make the loan payments & would like to be able to deduct the interest I am paying on my income taxes , but it is filed under his social security number. The bank has suggested I take out a new loan in my name & pay his off. But, I am 71 years old & I don't want to do this. Is there any other way I can deduct the interest on my taxes? I am having to dip into my IRA for living expenses , and it would save me money if I could.
Thank you for any advice you can provide.

Attorney Answers 4

  1. Best answer

    According to IRC Publication 936 you would need to be obligated on the loan. IRC Reg 1.163-1(b) says that you need equitable or legal ownership to take the deduction. Which you seem to have. There are a number of Tax Court cases that address this situation and you should have a local tax professional review these cases along with your specific facts to make a determination of whether you can take this deduction.

    Any individual seeking legal advice for their own situation should retain their own legal counsel as this response provides information that is general in nature and not specific to any person's unique situation. Circular 230 Disclaimer - Advice given in this response cannot be used to eliminate penalties with the IRS or any other governmental agency.

  2. Posted under the Tax practice area for a better chance of review and answer; this is not a Social Security question.

    The exact answers to questions like this require more information than presented. The answer(s) provided should be considered general information. The information provided by this is general advice, and is not legal advice. Viewing this information is not intended to create, and does not constitute, an attorney-client relationship. It is intended to educate the reader and a more definite answer should be based on a consultation with a lawyer. You should not take any action that might affect your claim without first seeking the professional opinion of an attorney. You should consult an attorney who can can ask all the appropriate questions and give legal advice based on the exact facts of your situation. The general information provided here does not create an attorney-client relationship.

  3. No. You would need to take out a loan in your name. I totally understand that you don't want to tie yourself to a loan at this time in your life. But the reality is, the upside for assuming that risk is being able to deduct the interest. The test for which party takes the deduction is not Ownership of the encumbered asset. The test is which party is ultimately liability for the loan.

    I don't see any way to deduct the interest without assuming the loan. The IRS needs to receive a 1098 with your name on it. The bank you are paying the interest to sends that to them. When there is a deduction with no matching 1098, they will ask questions.

    Christopher Larson
    Insight Law

  4. Since you are the legal owner of the home, you can deduct the mortgage interest. See the first sentence in (b) at . You should hire an experienced CPA and point out this Regulation.