My wife and I are filing separately and she is the only on on our home loan >750k. We are both on the deed. She is the only one on the 1098. Split the deduction?

[macuser_22 · Accepted solution]

Yes you can split it.  You are both liable for the loan since you are on the deed.   You will probably pay more tax than than if you filed jointly.

[xmasbaby0]

Married filing separately is usually the worst way to file--why do you want to file separate returns?

If you were legally married at the end of 2019 your filing choices are married filing jointly or married filing separately.

Married Filing Jointly is usually better, even if one spouse had little or no income. When you file a joint return, you and your spouse will get the married filing jointly standard deduction of $24,400 (+$1300 for each spouse 65 or older)  You are eligible for more credits including education credits, earned income credit, child and dependent care credit, and a larger income limit to receive the child tax credit.

If you choose to file married filing separately, both spouses have to file the same way—either you both itemize or you both use standard deduction. Your tax rate will be higher than on a joint return. Some of the special rules for filing separately include: you cannot get earned income credit, education credits, adoption credits, or deductions for student loan interest. A higher percent of your Social Security benefits may be taxable. Your limit for SALT (state and local taxes and sales tax) will be only $5000 per spouse. In many cases you will not be able to take the child and dependent care credit. The amount you can contribute to a retirement account will be affected. If you live in a community property state, you will be required to provide additional information regarding your spouse’s income. ( Community property states:  AZ, CA, ID, LA, NV, NM, TX, WA, WI)

If  you are using online TurboTax to prepare your returns, you will need to prepare two separate returns and pay twice.

https://ttlc.intuit.com/questions/1894449-married-filing-jointly-vs-married-filing-separately

https://ttlc.intuit.com/questions/1901162-married-filing-separately-in-community-property-states

https://ttlc.intuit.com/questions/1894449-is-it-better-for-a-married-couple-to-file-jointly-or-separ...

[maiad49]

Thank you for your concern regarding the separate filing. Believe me, I'd love to save half the work! 

We're phased out of most credits due to our income and need one of us has student loans on public service loan forgiveness and need to show less income to get a small decrease in monthly payment. 

[macuser_22]

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@maiad49 wrote:

Thank you for your concern regarding the separate filing. Believe me, I'd love to save half the work! 

We're phased out of most credits due to our income and need one of us has student loans on public service loan forgiveness and need to show less income to get a small decrease in monthly payment. 

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Yes, income based student loan payments is probably one of the only reasons to file separately.     But often looking at the long-term (spread over years), getting the loan paid off vs. extending it with lower payments (and paying more income tax in the mean time) usually works out in favor of getting the loan paid off sooner.