Joint Capital Gains and Dividends but Filing Separately

[NYHeel]

I'm planning on filing separately but had a question about how to handle capital gains and dividends for a joint investment return. I'd prefer to have the lower earnings spouse take the dividends and capital gains since there won't be tax on it that way since his income is low enough. However, while it's a joint account, the SSN that appears on the 1099 is the higher paid spouse's SSN. Can I still have the lower paid spouse take the capital gains and dividends? I'd think so since it's a joint account and both names are on the 1099.

I also have a similar question regarding mortgage interest. If both names are on the 1098 can I choose which spouse takes the deduction (I'm itemizing) or do I have to choose the spouse whose SSN is on the form?

I live in NY which is not a community property state.

[DaveF1006 · Accepted solution]

If you do not live in a community property state, you can allocate all those things you mentioned above anyway you wish, as long as your spouse agrees. You may also allocate the mortgage interest to yourself if you wish. The only time the rules are stringent if you live in a community property state.

Keep in mind though, if you itemize, your spouse must itemize also.  This may make an attractive return for you but your spouse may end owing taxes especially if they claim the dividend and capital gains income.

[NYHeel]

Thanks! That was my thought. I realize both have to itemize if one itemizes. It still comes out significantly ahead (mostly because of NY state) by filing separately.

One followup question. There were two mortgages in 2020 since we refinanced. The first only had one spouse whereas the second had both. I realize that for the second mortgage the interest can be divided however we like. But for the interest related to the first mortgage, does that have to go to the spouse that's on the mortgage? I assume so since the other spouse isn't even on it.

[DaveF1006]

It primarily depends on how it is listed on the deed. To be safe though, I would advise to allow your spouse to claim the first mortgage.

[DJR5]

Follow up to previous q&a with another memeber

1 - Please confirm, for NJ resident I can report Div, Int and Cap gains on joint accounts  100% on the lower income spouse return (married file separate) even if the primary ss# is the higher earning spouse. Or any split I choose.

2 - How do I repot that  - is there additional form(s) - Do I need to check the nominee box and issue a 1099?  Don't think need to issue 1099 to a spouse.

3 - Can I do 0%/100% for Divided, but 50/50 for capital gain/loss?

4 - How is capital loss carryover handled if filed joint in 2019 - can each spouse get a portion to max out the $1,500 each?

Thank you