Married filing separately and itemizing mortgage interest deduction. If married and jointly on the loan, do we split the mortgage principal amount or report full amount?

[Rami-Aboumourad]

I understand the MFJ maximum is 750K and MFS is 375K. For argument sake, assume our mortgage is 750K and mortgage interest paid in 2024 is 60K. We are itemizing our deductions 50/50, so if MFS we would each claim 30K in interest. However, as MFS, we can only deduct interest up to 375K principal, so the software reduces the interest deduction to 15K. As a result, my spouse and I are each only able to claim 15K deduction (total 30K) if we input the full loan amount. If we were MFJ, then we would be able to claim the full 60K. I suppose this highlights one of the benefits of MFJ. The question is, is it legal to split the outstanding mortgage principal in half, since we are 50/50 splitting our itemized deductions? Or are we tethered to the full amount since the loan has us both fully committed to the entirety of the mortgage loan? I hope I explained that clearly. Thank you!

[LindaS5247]

No, you can't split the principal balance of your home for the purposes of determining the mortgage interest deduction when you are Married Filing Separately. It is one of the disadvantages of filing separate returns.

It is limited to $375,000 if you are Married Filing Separately.

Per IRS Publication 936 Home mortgage interest. You can deduct home mortgage interest on the first $750,000 ($375,000 if Married Filing Separately) of indebtedness. 

Click here for Publication 936.