FAFSA, dependency & mortgage interest

[joanmcq]

I have new clients (RDPs) where one is going to school and has minimal income ($624 and a scholarship that doesn't cover tuition), and the other is supporting her. The student filed the FAFSA as an independent student, and is well over the age of 24; so that should be the only deciding factor as to independence. Federal law, of course, considers her single. I can't see where I could not take the student as a dependent of the working partner, FAFSA or no FAFSA, because the questions don't seem to cover the situation of someone being the adult dependent of a non-related, non married partner. Therefore, it seems I would have no problems taking the student as the working partner's dependent.

Another wrinkle in the situation is that the two own a house together, but for 2007, the mortgage was only in the student's name, but the working partner paid it. If the one is the dependent of the other, can I take the mortgage interest on the working partner's return? They've refinanced for 2008, but for 2007 there is $11,000 of mortgage interest at stake.

[taxtrio]

To claim the interest a person has to be liable for the debt, and have paid it.

Are these two "a couple". as they used to say? And living together without benefit of marriage...

as is so common today? In Michigan you might have a problem as it is "illegal" to co-habitate

without the benefit of marriage--- old law, still in force, and IRS district here says they will

enforce it and disallow dependent exemption as something illegal in Michigan.

I know a lot of people take the exemption in Michigan anyway... but technically not correct.

[kcjenkins]

The post starts out by saying they are RDPs, Trio. That means Registered Domestic Partners, California's attempt at dealing with the issue of gay couples. CA treats them as married, the feds do not. Makes it messy for the preparers.

I'd say that makes the mortgage issue simple, since clearly the one not on the mortgage is still an 'equitable owner'. I'll leave the dependency issue to the CA users to advise on. It smells to me, but hey, the whole thing is peculiar.

[joanmcq]

Yes, they are both on title, but (at least for 2007) only one is on the mortgage (the student). The details are, the student partner had $637 of wages and approx $8800 of scholarship/grant income, & $24000 of tuition, so none of the scholarship is included as taxable income, towards the dependency equation, although it does count for support. I believe she's taken out loans also. That's it. The working partner had $72000 of taxable wages, and paid $8300 just in medical benefits for her partner over and above the wages. The W-2 is odd on this, because the federal wages s/b higher than state on this point, but arent' so I'm not sure if they included the medical benefits as taxable wages, like they should have (taxable for fed but not for state..) or if they didn't subtract them for state wages. The working partner paid all of the living expenses for the couple.

I've got RDPs flooding in right now, and the cases just get more and more interesting (and complex).

[taxtrio]

The post starts out by saying they are RDPs, Trio. That means Registered Domestic Partners, California's attempt at dealing with the issue of gay couples. CA treats them as married, the feds do not. Makes it messy for the preparers.

I'd say that makes the mortgage issue simple, since clearly the one not on the mortgage is still an 'equitable owner'. I'll leave the dependency issue to the CA users to advise on. It smells to me, but hey, the whole thing is peculiar.

Thanks for the info... RDP's... interesting... one more anacronym to remember...

We tax preparers could hold a whole conversation without using an actual word!!

I think our families would agree, they think we speak jibberish as it is.

[joanmcq]

Well, my sig other is into computer graphics, synthesizers, computer animation. So whenever he starts with his gibberish, I give him some of mine. Neither understands the other one bit. Sometimes, if I need to really get something off my chest, I will preface with 'I know you won't understand a word of this but just listen and nod occasionally. Then I'll let you tell me something about synthesizers.'.