Often we are moved to help out family and friends by paying some of their expenses. Did you know that the IRS won’t allow a deduction on your tax return for the amount you pay? For example, if you pay another person’s mortgage payment or property tax, you are not entitled to deduct these amounts on your return because you are not liable for the payment. Likewise, the person for whom you made the payment is not allowed the deduction because he or she did not make the payment.
A good alternative is to make a gift of cash to the individual and have them make the payment on their own. This way, the deduction is not lost. Keep in mind, however, that in 2005 if the amount you give is in excess of $11,000 per year to one individual, the IRS requires you to file a gift tax return, even though no taxes may be due.