Yes, according to IRS Publication 936 (extracts below), your spouse can claim interest paid on a home loan secured by a home that she has an ownership interest in. Since she is on the deed and has paid interest on the loan she can claim a deduction.
Each of you enter the form 1098 information. Split the box 2 amount 50/50 and the split the box 1 amounts according to the agreed amounts paid. The total between you should equal the form 1098 amounts.
The interest deduction limitation due to the loan amount will apply to any loan amounts over $375,000 for you and over $375,000 for your spouse independently since you are filing separately.
As far as applicable state laws go they will govern what document(s) are needed proving an ownership interest. Typically a deed for property.
"Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). The loan may be a mortgage to buy your home, or a second mortgage.
You can’t deduct home mortgage interest unless the following conditions are met.
- You file Form 1040 or 1040-SR and itemize deductions on Schedule A (Form 1040).
- The mortgage is a secured debt on a qualified home in which you have an ownership interest. Secured Debt and Qualified Home are explained later."
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