Married filing separately - can one spouse claim all real estate tax deduction ($10,000) if paid from an account owned only by one of them (home in name of same spouse)?

[markkaye_96]

Pre-nup

[RaifH · Accepted solution]

Yes, one spouse claims the entire property tax and mortgage interest deduction if they are the only ones making payments on the house from a solely owned bank account. However, when you file separately, it is important to remember that if one spouse itemizes, the other must itemize as well, even if they have no itemized deductions. For more information on splitting itemized deductions, see the IRS FAQ about this topic.

[SweetieJean]

Are you in a Community Property State?

[markkaye_96]

In Virginia - but with pre-nup and we totally separate all finances and ownership of property.  Only I am on the title to the house.  does being in a community property state matter in this case?

[markkaye_96]

Hello, this is good.  the turbo tax expert kept insisting on a mechanical split (if married file separate) although I gave her the facts.  How do you claim the max $10,000 (SALT cap) in turbo tax?  Does it require Turbo tax intervention? thanks, Mark

[SweetieJean · Accepted solution]

Community Property States generally require that you split everything 50/50, regardless of who pays.  But VA is not a Comm Prop State. 

[markkaye_96]

Hi, that makes sense.  I saw something similar in IRS regulations - they call out community property states.

[markkaye_96]

is there a way to overcome Turbo's SALT cap of $5K when filing married but separate (in context of this thread discussion - one spouse pays all, separate finances, separate property ownership, etc)?  I want the full $10K SALT cap but TT is not allowing me. thanks

[DoninGA]

---

@markkaye_96 wrote:

is there a way to overcome Turbo's SALT cap of $5K when filing married but separate (in context of this thread discussion - one spouse pays all, separate finances, separate property ownership, etc)?  I want the full $10K SALT cap but TT is not allowing me. thanks

---

It is Not the TurboTax SALT cap.  It is the cap that is written in the Internal Revenue Code of the United States.

Go to IRS Schedule A to review the instructions for Schedule A -  https://www.irs.gov/pub/irs-pdf/i1040sca.pdf

The deduction for state and local taxes is generally limited to $10,000 ($5,000 if married filing separately).

If your filing status is married filing separately, both you and your spouse elect to deduct sales taxes, and your spouse elects to use the optional sales tax tables, you also must use the tables to figure your state and local general sales tax deduction

Limit on loans taken out on or before December 15, 2017. For qualifying debt taken out on or before December 15, 2017, you can only deduct home mortgage interest on up to $1,000,000 ($500,000 if you are married filing separately) of that debt.

Limit on loans taken out after December 15, 2017. For qualifying debt taken out after December 15, 2017, you can only deduct home mortgage interest on up to $750,000 ($375,000 if you are married filing separately) of that debt.

You can't deduct your mortgage insurance premiums if the amount on Form 1040 or 1040-SR, line 11, is more than $109,000 ($54,500 if married filing separately).

[PattiF]

Unfortunately, there is no way to overcome the limit in TurboTax of $5. It is part of the Tax Cuts and Jobs Act (TCJA), enacted in 2017 that limits the itemized deduction for state and local taxes to $5000 for a married person filing a separate return. This will be in effect until 2025. 

[markkaye_96]

Isn't this contradicted by the IRS website? See below

https://www.irs.gov/faqs/itemized-deductions-standard-deduction/other-deduction-questions/other-dedu...

Question

My spouse and I are filing separate returns. How do we split our itemized deductions?

Answer

If you and your spouse file separate returns and one of you itemizes deductions, the other spouse must also itemize, because in this case, the standard deduction amount is zero for the non-itemizing spouse.

• You may be able to claim itemized deductions on a separate return for certain expenses that you paid separately or jointly with your spouse.
• When paid from separate funds, expenses are deductible only by the spouse who pays them.
  • For example, if otherwise deductible medical expenses are paid from an account owned by one of the spouses or in a community property state from an account that's the separate property of one of the spouses under the laws of that state, only that spouse may claim a deduction for the expenditure.
• When expenses are paid from funds owned by both spouses, such as from a joint checking account or accounts considered community property under the laws of the state in which the spouses reside, you should generally split the deduction between you and your spouse.
  • For example, if amounts are paid from a joint checking account for interest on a residence both you and your spouse own, you would each deduct half of the mortgage interest paid on your separate returns.
  • However, if only one of you is eligible for a deduction for an expense (for example, real estate taxes on a property owned only by the eligible spouse), only the spouse who is eligible for the deduction is allowed to claim it, even if the expense is paid from joint funds. Each spouse must maintain records documenting who is considered to have paid the expense.

[RobertB4444]

@markkaye_96  All of that is correct but it does not speak to the limit that @DoninGA and @PattiF mentioned.  The $5000 limit on taxes deducted on your itemized deductions is a hard limit.  THEN you apply everything that you have found on the IRS website to that.  Go to this link that @DoninGA provided for you if you need to double check.

Link to Schedule A Regs

[markkaye_96]

Points well taken.  The IRS confuses things by its FAQ (agreed to by HR block mortgage interest and SALT - if the text is read).  As an agency, the IRS needs to more forcefully interpret the law in context - which it is not.  the current FAQ is guides strongly to MFS for the full $10K on SALT.  The black & white read of the law is too harsh - there is legal and implementing agency interpretation.  However, Turbo is designed as a mainstream tool and not to challenge the IRS - thus it takes a more rigid interpretation.  Good discussion on tax issues!