Impact of Voss decision (9th Cir. 2015) on mortgage interest deduction for unmarried co-owners + TurboTax 1098 entry

[jefftaxes]

I own a single family residence with my registered domestic partner in the State of California. We are single filers for our federal returns and joint filers for our state return.

My partner and I hold title to the property as 50% tenants in common, are co-borrowers on the purchase loan secured by our residence, and make our mortgage payments from a jointly owned checking account.  The original mortgage principal was $1,020,000, and the ending balance at 12/31/21 was approximately $1,004,000, for an average balance through 2021 of $1,012,000, which would normally exceed the $750,000 cap imposed by TCJA. However, I read about the Voss v. Commissioner decision of the Ninth Circuit Court of Appeals, which ruled that the mortgage principal limit is imposed on a per-taxpayer basis, rather than a per-residence basis.  While we reside under the Ninth Circuit's jurisdiction, the IRS announced that it would conform to the ruling nationwide.  I read some example applications of the ruling on the websites of various CPA and law firms, and it would appear that both my partner and I are each entitled to apply the $750,000 limit as separate individuals, effectively doubling the limit between the two of us to $1,500,000.

If this is a correct interpretation, how would we go about entering our data into TurboTax Premier, so that our interest deduction is not capped in proportion to $750,000 principal?  Since we are co-borrowers on the loan, we only received one 1098 form with both our names listed, showing the full principal amount of $1,020,000.  When I enter the 1098 into TurboTax, it prompts me to simply enter the Box 2 (outstanding mortgage principal amount), rather than, for example, splitting it in half to $510,000, which would enable to fully deduct 100% of the mortgage interest paid on my half share of the total principal.

Thanks for your help.

Reference sources:

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/how-do-the-new-tax-laws-affect-m... (Same question previously asked regarding deduction limit, but not how to enter into TurboTax)

https://www.thetaxadviser.com/issues/2016/dec/mortgage-interest-deduction-limit-per-taxpayer-basis.h...

https://www.bnncpa.com/resources/irs-agrees-that-unmarried-homeowners-are-entitled-to-greater-intere...

https://www.forbes.com/sites/anthonynitti/2016/08/01/irs-increases-marriage-penalty-unmarried-cohabi...

https://gscpa.com/mortgage-interest-deduction-unmarried-couples/

[Mike9241]

i am not a lawyer.

in Voss the tax court found for the IRS

taxpayers went to appeals (9th Circuit) where they won

the IRS acquiesce to the Appeals Court decision in an AOD

AOD 2016-02, 2016-31 IRB 193 (Aug. 1, 2016)

 An IRS Action on Decision (AOD) gets issued at the discretion of the Service only on unappealed issues decided adversely to the government. It generally functions as guidance for Service staff working with similar issues. Unlike a Revenue Ruling or Treasury Regulation, an AOD isn’t an affirmative statement of Service position. An AOD isn’t intended as public guidance and may not be cited as precedent. 

nothing new in the tax laws.

so if you go the route of the taxpayers' victory, the IRS could dispute the deduction. since the AOD can't be cited as precedent, you could end up in tax court. however, since it's supposed to function as guidance for IRS personnel one would suppose that the IRS personnel would follow its own guidance.

as to how to enter in TurboTax, you would have to enter 50% of the 1098 amounts on each return. 

you may want to talk to the financing institution to see if they'll issue a 1098 to each of you for 50% of the amounts.  

the splitting is the same procedure a married filing separate couple would have to do.