My situation is somewhat unique.
I personally is a VA resident; My wife lives in another state, NY. We file federal tax jointly using my VA address.
We itemize our federal tax returns. We own two homes, one in VA, as my principle address/home, and one in NY, as my wife's principle home.
when we file state return, NY would file the return as a prorated return on all deductibles, and thus we can just claim all deductibles and NY partial year will prorate it correctly.
However, VA tax return is different and asks for itemized deductible "only as VA resident". As I understand, I did not deduct any NY property tax on my VA return.
The mortgage interest is more interesting. On an "ideal" basis, we did not claim the full amount on our NY filing (Only 50% on NY is deducted). I am also on the NY property mortgage and title.
I am unsure if I should file which of the four options below:
A, claim full amount on federal return. This way, I would have claimed tax refund for half the total mortgage interest (NY + VA) on NY return, and full tax refund on VA return, which sounded wrong.
B, claim half NY mortgage interest, and full amount of VA mortgage interest on my VA return. This way I still claimed full NY mortgage interest for the two states combined, but for my VA property I claimed full amount twice in both states.
C, claim half mortgage interest for my NY +VA properties. This sounded most reasonable and is what I planed on my state return. But I am very unsure if this is defensible (i.e., it's going to be complicated math to show to an auditor if I encounter it, as my situation is further complicated that I rented out my VA property in second half of the year and moved to another VA address as a tenant. Have to do this as I am with an VA job that requires my to be onsite. In reality, I am claiming half of my NY property interest and around 1/4 of my VA property mortgage interest, using similar line-of-thoughts as above mentioned but accounting for that I rented the property out for half a year).
D, claim only VA property mortgage interest. This, while safest, sounds unfair since I lose half mortgage interest tax credit on my NY state return.
I found nowhere that VA requires the mortgage interest to be within state, but only require that the payment is made during the time that I am a VA resident. It also requires that the property to be a principle or secondary home. I feel I qualify for both (payment is made during my VA resident time; I am on the mortgage; the property is my wife's principle residence and my secondary home).
Thanks in advance!
