Since you are splitting the interest, you will also split the principal. You do not need to use Pub 536 to calculate the allowable deductible interest if you are splitting it 50/50 or any way that does not cause one of you to have a balance of more than $500k. Be sure you allocate the same percent of mortgage and interest if you are not splitting it 50/50 (example 40% interest needs to have 40% of the principal reported on that return)
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