Q: I am in the process of a divorce. If I give my husband the marital home and continue to pay the mortgage (in exchange for other assets), will I still be able to deduct the mortgage interest off my taxes? Or will that have to be paid in after tax income? —Anna, Leominster
The following answer was provided by Barbara Damon, CPA, Edelstein & Company, LLP.
A: This would depend on a number of issues. If the house still in your name or owned jointly, then you could deduct the interest as your second home. If it is considered alimony you could deduct it, but not if it is considered child support.
When getting divorced, be sure you ask your divorce attorney for the tax implications of the settlement you are agreeing on, especially regarding post divorce payments. Even on property settlements you should consider basis as well as fair market value when slitting assets.
The following answer was provided by Mark Misselbeck, CPA, Levine Katz Nannis & Solomon PC, Needham.
A: It is unclear from this information how this will be treated - are the continuing payments due to the fact that you will share in the ultimate proceeds from any sale of the house? That result would be at odds with the information contained in the question that you are transferring the property to your husband in exchange for other property.
If the continuing payments you are required to make on the mortgage occur because you got more in vale of other property than your husband got by getting the home, then you have a property settlement extending over several (many?) years - they may or may not constitute alimony - if they are, they would be deductible, whether or not you itemize deductions, and for both the principal and interest paid on the mortage. You should have someone look at the provisions of your divorce decree/decree of separate maintenance and the tax provisions governing alimony vs. property settlements to determine the appropriate treatment of these payments.
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