If You Pay Somebody Else's Mortgage, Can You Deduct Interest?

In another good bit from the Kiplinger Tax Letter, according to the IRS, the answer is no. Even if you actually paid any of it yourself. You have to be liable on the loan and an equitable owner to be eligible.

But Kiplinger's points to a limited exception based on a ruling back in 1997. It says that a couple could deduct interest that they paid on a home loan, that their relatives signed for. The reason was that the couple had poor credit, and the relatives stepped in to help. But the occupants of the home made the payments, lived in the house, and made all repairs and improvements. They experienced all benefits and burdens of ownership.

I guess the IRS does not concern themselves with risk of foreclosure as one of the 'burdens' of ownership. The charitable relatives took on this burden, but Uncle Sam doesn't seem to mind.