DEAR BOB: I am paying one-half of my son’s mortgage payments, but my name is not on the mortgage papers. However, my name is on the title to the home. Can I deduct one-half of the mortgage interest and property taxes on my 2007 income tax returns? –Rhoda J.
DEAR RHODA: Yes. It is irrelevant that your name is not on the mortgage obligation. What matters is your name is on the title to the residence, making you legally obligated to be sure the mortgage and property taxes are paid.
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Therefore, you are entitled to deduct the mortgage interest and property taxes you pay in 2007 on your 2007 federal and state income tax returns. For more details, please consult your tax adviser.
I.R.S. HAS NO EXACT ANSWER HOW LONG HOUSE MUST BE RENTED
DEAR BOB: I want to convert my rental house, which I acquired in an Internal Revenue Code 1031 tax-deferred exchange, into my personal residence. I know I need to own it a minimum of five years, and must occupy it at least 24 of the last 60 months before selling it to qualify for that $250,000 exemption ($500,000 for a qualified married couple). But how long must I rent it to tenants after taking title before I can convert it to my principal residence? You said in a previous article to rent it at least six to 12 months. But my accountant says I must rent it for two years. –Lewis L.
DEAR LEWIS: According to the IRS, there is no exact answer to your question about how long a rental property acquired in an IRC 1031 exchange must be rented to tenants before converting it to your personal residence.
However, you must be able to show rental intent at the time of acquiring the property in the trade. Your accountant’s opinion of two years for the rental period is fine. But I think that is far longer than is necessary to show rental intent.
DON’T CONFUSE PMI WITH FHA INSURANCE
DEAR BOB: I recently purchased a home using an FHA rehabilitation loan. My question involves the PMI (private mortgage insurance) required by my lender, Wells Fargo. I bought the house at a foreclosure sale. I know that PMI is supposed to be paid until there is 20 percent equity accumulated in the home, but in my case I already have more than 20 percent equity. Yet my loan contract says I must pay PMI for the next 10 years. When can I stop making these extra payments? –Dwight B.
DEAR DWIGHT: The answer is you have an FHA mortgage. You do not have a PMI mortgage.
The rules are different. Depending on the type of FHA mortgage, there is MI (mortgage insurance), which must be paid for a number of years. If you wish to get rid of the FHA insurance, consider refinancing with a non-FHA mortgage.
The new Robert Bruss special report, “Pros and Cons of Living Trusts to Avoid Conservatorship, Probate Costs and Delays for Your Heirs,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.
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