Author Topic: Separate tax returns, who takes the home interest / property tax deductions?  (Read 1330 times)

rael

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My girlfriend and I own a house together which is under both of our names. We pretty much share all of our income and expenses, however we are unmarried so we file separate tax returns. I am wondering how to split up home interest and property tax deductions?

From what I understand, we can split up the exact numbers however we like since the house and mortgage is under both of our names. My guess is that the ideal solution is for the person with the highest marginal tax rate to take ALL deductions (from property tax and interest and anything else shareable). Then the other person takes the Standard Deduction.

Just wanted to make sure my thinking is accurate. What do you guys think, am I missing anything? The idea of course is to get as high above the standard deduction as possible for one single person, since we have to beat 9k for any itemized deductions to start counting anyway.

seattlecyclone

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From the IRS documentation for the mortgage interest deduction:

Quote
More than one borrower. If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Show how much of the interest each of you paid, and give the name and address of the person who received the form. Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13.

Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. Let each of the other borrowers know what his or her share is.

Seems pretty clear to me. You can't just split up the interest reporting based on who would benefit the most from deducting it. You are each entitled to deduct the amount of interest you actually paid. No more, no less. If you split the mortgage payments 50/50, that's how you need to split up the tax deduction.

Of course going forward, there's nothing stopping whichever one of you earns more from making the mortgage payments while the other pays for utilities, groceries, and other non-deductible expenses. :-)