I have bought a home jointly with my life long friend earlier this month. I am unsure how we will should file our taxes. Will we split the property taxes we paid 50/50 like how we actually pay it? Or

[Critter-3]

Here is the rub ... splitting the itemized deductions usually will not work so one person should claim all of the mortgage interest, PMI if any and RE taxes as itemized deductions  and the other use the standard deduction.  

The higher wage earner will get the best bang for the buck and they should pay the entire bill out of their checking account or a joint account just incase the IRS asks.  Of course you can compare all the options before you file ... by using one of the Downloaded versions you will have that ability to do some what if scenarios. 

[xmasbaby0]

If you are both on the mortgage and deed then you can split the mortgage interest and property tax deductions on your individual tax returns according to how much you each paid.  If you just became home owners in October of 2020, do not expect homeownership to have much--if any--effect on your tax return.

HOMEOWNERSHIP DEDUCTIONS

It is very hard for a lot of people to use itemized deductions now that the standard deduction is so much higher.  Your home ownership may not have any effect on your tax due or refund, especially if you purchased the house late in the year.  

Standard Deduction
Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund.  The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting  tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach.  The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you.  Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes. 

2020 Standard Deduction Amounts

Single $12,400   (+ $1650 65 or older)

Married Filing Separate  $12,400   (+ $1300 if 65 or older)

Married Filing Jointly $24,800   (+ $1300 for each spouse 65 or older)

Head of Household $18,650  (+ $1650 for 65 or older)

Home Ownership

There is not a first time home buyers credit on a Federal return. That ended in 2010. If your state has such as credit, you will be able to enter it when you prepare your state return.

Buying a home is not a guarantee of a big refund.  Your deductions for homeownership combined with your other deductions (if any) must exceed your standard deduction to change your tax due or refund. If you purchased your home late in the year, you do not even have a full year of home

ownership deductions.

Your closing costs on your new home are not deductible except for prepaid interest, prepaid property tax or loan origination fees.  There are no deductions for appraisal, inspections, title searches, settlement fees. etc.

Your down payment is not deductible.

Your homeowners insurance for fire, hazard, flood, etc. is not deductible for your own home.

Home improvements, repairs, maintenance, etc. for your own home are not deductible. 

Homeowners Association  (HOA) fees for your own home are not deductible.

Go to Federal> Deductions and Credits> Your Home to enter mortgage interest, property taxes, private mortgage insurance (PMI) and loan origination fees (“points”) that you paid in 2020.  You should have a 1098 from your mortgage lender that shows this information.  Lenders send these in January/early February.

[Opus 17]

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@Critter-3 wrote:

Here is the rub ... splitting the itemized deductions usually will not work so one person should claim all of the mortgage interest, PMI if any and RE taxes as itemized deductions  and the other use the standard deduction.  

The higher wage earner will get the best bang for the buck and they should pay the entire bill out of their checking account or a joint account just incase the IRS asks.  Of course you can compare all the options before you file ... by using one of the Downloaded versions you will have that ability to do some what if scenarios. 

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I disagree in part.

If you are not legally married, then your only option is to deduct the expenses according to what you actually pay.   I believe the ability to split the deduction at will only applies to spouses.

It is true that in many cases, splitting the itemized deduction will give a less than full benefit to both taxpayers. The solution is to divide the expenses when you actually pay them, so that one person can fully deduct them.  If possible, one person could pay all the mortgage, and claim the interest and property tax deduction, and the other owner could pay for insurance, food, utilities, and so on.  If you actually split the mortgage, and are not married, I think you have to split the expense even if it disadvantages you. 

[Critter-3]

Again ... some tax planning is the way to go ... make sure the one deducting the expense is the one paying it. 

[TomD8]

Simplest solution: set up a joint checking account with your co-owner.  Each owner contributes equally to the joint account.  Pay all expenses out of the joint account.  Then divide up the tax deductions 50/50.

[Critter-3]

Thanks... that brings us back to my original answer suggesting a joint account. 

[Opus 17]

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@TomD8 wrote:

Alternate solution: set up a joint checking account with your co-owner.  Each owner contributes equally to the joint account.  Pay all expenses out of the joint account.  Then you can divide up the tax deductions any way you want.

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I don't see how this removes my objection at all.  How can taxpayer 1 claim all the interest as "his share" if he or she only contributed half the money to fund the account that made the payment?

This is what the IRS says,

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 paper 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 or 1040-SR), line 8b, and print "See attached" next to the line. Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040 or 1040-SR), line 8d.

Similarly, if you're 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 or 1040-SR), line 8a. Let each of the other borrowers know what his or her share is.

Unhelpfully, it doesn't say how to determine each persons' "share". 

Here are some articles that support my argument.

https://finance.zacks.com/split-mortgage-interest-tax-deductions-9117.html

https://homeguides.sfgate.com/claiming-tax-deductions-house-multiple-names-deed-67165.html

https://law.scu.edu/same-sex-tax/shared-home-ownership-who-gets-to-take-interest-and-property-tax-de...