Tax Year Prior to 2020: Married filing separately mortgage interest

[superman23]

I should clarify. The federal worksheets appear to be correct with respect to lines 11 and 12 (12 is blank). As we are ending up with the standard deduction, I do not know what would print on form 1040, schedule A. However, we are able to itemize deductions for NYS. Form IT-196 is completed as if the mortgage interest is being paid to the spouse. As far as I can tell, the federal input is correct. 

BTW, while scrolling again through the mortgage interest screens, I do not see a screen for "uncommon situations". But I do think we have checked the correct box regarding form 1098. I think it says that the 1098 is not in the name of the taxpayer. I didn't see a box that says neither one of our names is on the 1098.

Any additional suggestions.? Thank you.

[DMarkM1]

For married filing separate returns, in the mortage interest topic you will only enter your portion of the interest paid on your return and your spouse's on her return.  

1. "Deductions & Credits" tab
2. "Edit/Add" "Mortgage Interest" topic
3. "Edit" the 1098 for the lender or "Add a lender" if applicable
4. "Continue"
5. "Someone Co-owns this loan" then select the appropriate option for the separate return you are working. 
6. "Continue"
7. Put in the information for the other person as applicable.
8. Enter only the correct portion of the 1098 amounts that belong to each of you

The correct allocations will then flow to the individual state returns. 

[DMarkM1]

For married filing separate returns, in the mortage interest topic you will only enter your portion of the interest paid on your return and your spouse's on her return.  

1. "Deductions & Credits" tab
2. "Edit/Add" "Mortgage Interest" topic
3. "Edit" the 1098 for the lender or "Add a lender" if applicable
4. "Continue"
5. "Someone Co-owns this loan" then select the appropriate option for the separate return you are working. 
6. "Continue"
7. Put in the information for the other person as applicable.
8. Enter only the correct portion of the 1098 amounts that belong to each of you

The correct allocations will then flow to the individual state returns. 

[superman23]

I don’t have option 5. I have “who is your mortgage lender”, “what kind of property do you have?”, “Do any of these situations apply?” Answered “My name is not on the 1098, or my name isn’t the first one listed on the 1098”, “Enter other person’s information” where I entered spouse’s name and address, “Let’s get the details from your “lender’s” 1098” where I provided information including only taxpayer’s  share of interest, “is this loan secured by a property of yours” to which I answered “yes”, and completed “explain  the difference” between the interest entered and form 1098. Some further questions which would have no affect on my issue. 
The correct amounts flow to form IT-196 but it shouldn’t show the spouse as the payee.

[DMarkM1]

Perfect.  The name and address on line 11 of NY form 196 serves two purposes.  It for the seller's information in a seller-financed mortgage or for the co-owner information identifying the person who received the 1098.  

See the line 11 instructions on pages 2 and 3 here. 

[superman23]

Never realized that. Should have read the instructions first. Sorry. Thank you!

[Mac1287]

@DMarkM1 

I've been reading through this thread and although I have Step 5 "Someone co-owns this loan", the Turbotax clarification box makes matters confusing. It specifically states that this option doesn't apply for loans taken out with your spouse, even if filing separately. Obviously without checking this option, I am unable to clarify that the 1098 only has my name/SSN on it (not my spouse's) even though we pay with a joint account and are splitting the interests/principal/taxes on our returns. Can you clarify if I should just ignore the Turbotax 'Help' Section and proceed with the co-own option? Thank you.

[DianeW777]

No, do not proceed with the co-own option unless someone in addition to your spouse co-owns the loan.  If you and your spouse are responsible for the loan, only one name and social security number will appear on the statement. However, IRS tax law is clear. On separate returns you will deduct what you actually paid. On your spouses' return the deduction will be what your spouse actually paid.  If, in your situation, you each paid half then that is how you will list it on your tax return.

• IRS Publication 936

[superman23]

I was reviewing the worksheets. I think I entered everything correctly. Lines 11 and 12 are fine. But I think line 9 should be checked “yes” as this was the original loan which was refinanced in 2021. Also, on the Smart worksheet, line B is checked “yes” when it should be “no”. This was the original mortgage. Line C is blank when I think it should be “yes”. Something doesn’t jive.
But do I care? The result on the return doesn’t matter because the standard deduction is greater than itemized (on both returns).

What is the significance of these worksheets. In some cases, I can check the proper box directly on the worksheet. Does that do anything?

[Mac1287]

@DianeW777 

If I don't select the 'Co-own' option, how should I proceed with the Turbotax questionnaire? I am filing Married Filing Separately (for student loan purposes) and Publication 936 doesn't have any explicit guidelines for my case. I only see a section in Pub 936 talking about co-owning with another person (other than your spouse if you're filing jointly).

Do the following steps make sense?

1. Select None of these apply under Do any of these uncommon situations apply to your loan...?

2. Under Details from your 1098, enter half the amount for the Principal, Mortgage interest, and Real estate taxes and check the box that says The interest amount I entered is different than what's shown on my 1098

3. Select Primary Home for What kind of property is this loan secured by?

4. Provide explanation that it is split 50/50 for MFS under Tell us why your 1098 is different.

Does this really make a difference since we're taking the Standard Deduction? Looking at our 2020 Tax Returns, there's no section in the Home Mortgage Interest Worksheet for explanations. Everything was just split in half and I believe the questionnaire was simpler last year.

[DMarkM1]

You are correct.  If you both are electing the standard deduction then there are no entries required for an intemized deduction such as mortgage interest forms 1098.  

[Mac1287]

@DMarkM1 

Thank you for the response. As for my suggested steps to take in Turbotax, is this the preferred method or do you recommend another way (considering I technically do not "co-own" the loan with my spouse [& MFS] as per Turbotax)?

[Vanessa A]

If you do not co-own the loan and you are not itemizing, the best steps are to just not enter anything. 

[Mac1287]

I believe I do need to input it so it can transfer to my NJ state returns.

[superman23]

Or, for NYS, itemized deductions may be greater than the standard deduction, even if taking the standard deduction on the federal return. So the questions should still be answered in a manner to get the correct deduction on each MFS return.