High home prices and interest rates are driving people to buy property with friends, siblings, or parents to share costs and enter the market. Tax treatment of co-owned property depends more on who actually pays mortgage interest and property taxes than on legal ownership percentages. Owners should allocate deductions according to actual contributions and maintain detailed records, receipts, and written cost-sharing agreements. Co-owners should coordinate upfront which individual will claim specific deductions to avoid duplicate claims and IRS scrutiny. Consult a CPA for guidance on complex tax rules, deduction limits, refinancing, ownership changes, and accurate reporting.
In the current real estate market, where home prices and interest rates are high, more people are opting to purchase property with friends, siblings, or parents to share costs and enter the property market. However, when it comes to tax season, determining who is eligible for deductions can be complex. Understanding how co-ownership impacts tax deductions is crucial to avoid issues with the IRS.
The IRS focuses more on who paid the expenses rather than the legal ownership split when it comes to tax deductions for co-owned properties. Deductions for mortgage interest and property taxes should be based on actual contributions, not just ownership percentages. Keeping detailed records, receipts, and agreements on cost-sharing is essential to simplify tax filing and address any IRS inquiries.
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