When filing Married Filing Separately (MFS), you each report only the portion actually paid, in your case, 50% each.
For Form 1098 entry:
- Box 1 (Mortgage Interest Paid): Each should enter 50% of interest paid.
- Box 2 (Outstanding Mortgage Principal): Each should enter 50% of the outstanding principal balance.
Each of you can claim your half as long as your reported principal (half of $664,000) is under the $375,000 MFS limit.
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