So You've Decided to Cohabitate...
Good for you! Love is a many splendored thing, and nowadays a record number of couples are enjoying that splendor without getting married.
If you’re like most folks, when you shacked up you made an agreement to split all costs straight down the middle. There is an interesting theoretical conversation about whether that’s appropriate when different occupants earn markedly different salaries. But I’m not your couples therapist, so we’re going to skip that part.
When you’re renting, this is all super easy. The rent is X, you each pay half of X, life is good. But what about when one of you (and by “one of you”, I mean “the bank”) owns the space?
Well, that’s different.
But why? Can’t you just split the monthly mortgage payment like you would rent? You could. But one of you may be getting a raw deal in that scenario. The reason is quite simple and has to do with an enormous government assistance program that’s specifically targeted to people who think they don’t need government assistance programs. That’s right: deductions for mortgage interest and property tax.
I have a lot of clients and friends who think by splitting the monthly mortgage payment they are splitting the expense. Not true. The person whose name is on the mortgage gets to claim deductions for the entire amount of interest and property taxes for the year, even though they only paid half.
Hardly fair, right?
This is all solved fairly easily by determining the value of those tax deductions and allocating it via an unequal split in the monthly mortgage payment. Or whatever else you might negotiate. Maybe the homeowner bears the bulk of the repair costs. I’d go for laundry duty, but that’s just me. As with all things in relationships, communication is key.
Though I’m not taking new clients right now, I still love talking to y’all about interesting things that cross my path. If you have a question or situation that you think would make a good blog post, give me a shout.