* Residence: The child has the same principal residence as the taxpayer for more than half the tax year. Exceptions apply, in certain cases, for children of divorced or separated parents, kidnapped children, temporary absences, and for children who were born or died during the year.
* Age: The child must be under the age of 19 at the end of the tax year, or under the age of 24 if a full-time student for at least five months of the year, or be permanently and totally disabled at any time during the year.
* Support: The child did not provide more than one-half of his/her own support for the year.
Q: I have a question regarding property tax. My husband and I live in my mother-in-law's house. She doesn't live with us, but with my sister-in-law (my mother-in-law has Alzheimer's and my sister-in-law has her power of attorney). The house is still in my mother-in-law's name. We paid the property taxes on the house last year (a little over $2,200) because my sister-in-law said we had to since we live in the house. Can we deduct this off of our taxes this year? We also paid the homeowners insurance on the property last year.
Dupree: The following two tests must be met for you to be able to take the deduction:
* The tax must be imposed on you.
* The tax must be paid during the tax year in question, in this case 2004.
Generally, you can deduct only taxes that are imposed on you. That is, you can deduct property taxes only if you are the property owner. For more information, see IRS Publication 17, "Your Federal Income Tax."
Q: My mother died in February 2004 with a holographic will that left everything to her three children "to divide as they see fit." The will went through probate and I am the executor of the estate. Her estate is under $1 million dollars. Nonetheless, her house is listed as part of the estate of which the beneficiaries are me, my brother and my sister. The house is up for sale and I have been making all the mortgage payments. Can I deduct the interest on her house, in addition to the mortgage interest on my own home? What about upkeep, bills and other expense related to her house? Can they be deducted too?
Dupree: Generally, home mortgage interest is any interest you pay on a loan secured by your home, which can be a main home or a second home you own. You can deduct home mortgage interest only if you meet all the following conditions:
* You must file Form 1040 and itemize deductions on Schedule A (Form 1040).
* 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. Generally, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. The term qualified home means your main home or second home. For details, see IRS Publication 936.
Thus, whether you can deduct the mortgage interest depends on who owned the home when the payments were made. If you own only one-third of the home, only one-third of your payments are deductible.
Expenses for upkeep are not deductible. However, it is possible that the expenses could be taken into account to reduce any gain on the sale of the home. See IRS Publication 523, "Selling Your Home," for more details.
Dupree's tax tips are compiled online here.
You are welcome to e-mail comments and questions to firstname.lastname@example.org. They may be used in a future column or newsletter with the writer's name unless otherwise requested.