We're taking out a $400,000 mortgage loan this year, so I understand that we can deduct interest on up to $750,000 if filing jointly but only $375,000 if filing separately. But can we deduct interest up to $375,000 for each of us? For example, if filing separately, can we each deduct interest on $200,000 for the $400,000 loan?
Not sure why you are filing separate returns at all if you are legally married, since that is usually the worst way to file. But if you are filling separately, the amount you can enter for mortgage interest paid might be dictated by whether you are in a community property state. Or if you are not in a community property state, you can each enter the amount of interest that you paid, UP TO but not to exceed the total amount of interest paid-----so no, you cannot each deduct up to interest on a $750,000 mortgage if your mortgage was for $400,000.
In January you will receive a 1098 from the mortgage lender, showing the amount of interest paid during the tax year. Divide that amount between the two of you when you prepare your separate tax returns. The amount entered on your two returns cannot exceed the amount on the 1098.