Tax Year Prior to 2020: Mortgage Interest Deduction for Joint Owners

[o2dunbar]

My partner and I own a house as Joint Tenants and our total mortgage amount is over the $750K limit. We're trying to understand how to calculate this. I was told by an accountant that since we are single and joint tenants, we EACH have a limit of up to $750K, and so only run into the limit if our total mortgage is over 1.5 million. Is this correct? I can only find related information to married couples filing separately, but nothing for 2 singles owning in joint partnership. Does someone know?

[VictorW9]

No, that is not correct. For couples filing jointly, they can only deduct interest on up to $750,000 of qualified home loans. These limits include any combination of qualified loans, such as mortgages, home equity loans and HELOCSs.

[o2dunbar]

Thanks, but my question applies to two individuals who own a home together. We are not married or legally connected. We file separate returns as Single Individual filers. The home is owned in joint tenancy, 50% each. 

[NCperson]

look at this publication

https://www.irs.gov/pub/irs-pdf/p936.pdf

and especially the flow chart and the table on how to calculate the limit,

while you may not be married and jointly own the home, ALL the mortgages are qualified debt against ONE house.   you own the home together and aren't both your names on the mortgage(s)? 

also, look at the bottom left corner of page 9

[o2dunbar]

Thanks for the reply. I've now talked to 2 CPAs who both said that the deduction is with the person, not the property, so 2 individuals can both take the full deduction. The reason married couples have to split it is because they're one unit. I'm sharing this in case it's helpful to others.

[NCperson]

just so I understand what you meant by 'so 2 individuals can both take the full deduction."

let's say the mortgage servicer issues a 1099 stating the mortgage interest on your mortgage is $15,000.

are you suggesting you think you can EACH take that one document and EACH of you can deduct $15,000 deduction for a total of $15,000 in deductions ??????

and if there were 10 owners each owning 10% of the home, they EACH could take $15,000 deduction. 

And if there were 100 owners each owning 1% of the home they could EACH take a $15,000 deduction??????

curious of your thinking...

thx

[Michael58]

When fill out my Mortgage interest I have a $10,000 interest, which I claim half, my Loan amount is $490,000

since I'm filing separately do I put loan of 245,000?? Or the the full amount?  Thank you...

[NCperson]

yes; you'd split everything in half....

are you suggesting you are married and filing separately? 

if so, may I ask 'why'....96% of married couples file "joint" because the tax laws motivate that behavior!!  There is a misconception that filing separately will save on taxes - only in the rarest of circumstances will that occur.

and many of that remaining 4% are legally separated or they can't get their spouse to sign the return.   

[Michael58]

No we are not married. So lets be clear so you are saying that the $490,000 on the 1098 I can put it @ $245,000?

[NCperson]

correct 

[o2dunbar]

No, NCperson, I'm sorry that's not what I meant at all. You would have to read my original question to get what I was saying. When 2 individuals own a home together and are equally share al expenses, each person can claim half of the mortgage interest and property taxes on their returns (or whatever percentage they have agreed to based on how expenses are split. What I had originally asked about what was do individuals do when the mortgage is above the $750K limit; do they each get to include their half up to the $750K limit or do they have to split the limit in the way married couples do? I read the tax code and it only refers to married and singles, not joint ownership as singles. I've now consulted 2 CPAs who told me that even if 2 individuals share a house over $750K, you are still 2 individuals and get to use the $750K limit in determining how much of the mortgage interest is deductible (because anything over that limit is not). In our case, if we divide our mortgage in 2, it falls under this limit and so we can each claim our full halves. Hope that clarifies.  

[Htown3514]

Had this exact same question and saw this thread. Ended up finding a case in an accountancy journal from 2012 that covered this exact topic. Unfortunately it didn't have the outcome I was looking for and ruled that non-married co-owners can't double dip on the $750k deduction max. Case was here: https://www.journalofaccountancy.com/issues/2012/jul/mortgage-interest.html 

[gjemmott]

If I understand this correctly (big if)...

The 2012 decision you (@Htown3514) referred to was overturned in 2016.

https://www.forbes.com/sites/anthonynitti/2016/08/01/irs-increases-marriage-penalty-unmarried-cohabi...

Note that I have no idea if things have changed *since* 2016, and am still figuring out the actual answer to this question... but I'm leaning toward trusting the OP (@o2dunbar) who said they asked two CPAs who both said two single joint-owners could each claim mortgage interest deductions up to the single-filer limit.

[Mike9241]

@gjemmott 

for unmarried co-owners of a residence, the debt limit applies to each taxpayer, not to the property - Voss 116 AFTR 22 2015-5529 (9th Cir 2015)

https://us9thcircuitcourtofappealsopinions.justia.com/2015/08/08/voss-v-commissioner-2/ 

the IRS announced it would follow this decision (AOD 2016-02)

https://www.irs.gov/pub/irs-aod/aod-2016-02.pdf 

read the last paragraph