Sharing Mortgage Interest and Taxes

[bbuchanan99]

I own a home with my partner, and we file taxes separately. For this home, I would like to take half of the mortgage interest, points, and taxes paid and use them in my tax calculations. My question is, do I also split the "Outstanding Mortgage Principal" in half and put half on my tax form and half on hers?  I am up against the 750K/1M limit on deduction, so this calculation significantly changes my tax situation.  Thanks in advance for any insight anyone can lend.

[VictoriaD75]

It depends. To deduct interest on a mortgage, the taxpayer must be legally liable for the debt. No deduction is allowed for payments made for another's obligation if the taxpayer is not liable. Therefore, you both must be on the mortgage in order for the interest to be split to be deductible for each. In that case, you would simply claim half (or any agreed upon percentage) on each return as long as the total deducted does not exceed 100% of the interest expense.

You also mention you are up against the limit on the deduction. Splitting the interest between two taxpayers does not preclude you from this limit. This is a total on the property, not per taxpayer. For mortgage debt incurred on or before December 15, 2017, interest is deductible on the first $1 million ($500,000 for married filing separately) of debt. After December 15, 2017, interest related to the first $750,000 of mortgage debt id deductible. 

Deducting Mortgage Interest

[NCperson]

@bbuchanan99 it depends whose name is on the mortgage AND who made the payments.  

"To deduct taxes or interest on Schedule A (Form 1040), Itemized Deductions, you generally must be legally obligated to pay the expense and must have paid the expense during the year"

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

[bbuchanan99]

So we are both on the loan and we pay from a joint account, so I believe we meet those requirements/best practices.  Where it makes a difference is that I own 2 other properties and if you add up the mortgage loan values on those 2 plus 1/2 of the 3rd property i am under the 750 threshold and hence I get the full advantage of the deduction.  If I take 1/2 the interest and put the mortgage value in as the entire value on the tax statement I get limited out by being over 750k...

Does this make sense? The overarching question is if I only take 1/2 the interest shouldn't I also only have to take 1/2 the limit burden?

[NCperson]

@bbuchanan99 you can only deduct the interest on your primary home and ONE second home.  Does that solve your $750,000 limit issue?

and @VictoriaD75 answered your question that the limit is PER PROPERTY and not per taxpayer; the entire debt is part of the calculation to determine the $750,000 limit even though you may only be paying 1/2 the interest.