Married filing separately (MFS): how to handle 1098 (Mortgage Interest paid on Primary Home) when home is jointly owned?

[M58V58]

We are in CA state.

Need help figuring out which spouse should report data on form 1098 when the home is owned jointly.

[xmasbaby0 · Accepted solution]

You are in a community property state---there are strict rules for filing MFS and for doing so in a community property state.  You each enter 50% of the the mortgage interest.

If you were legally married at the end of 2023 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 $27,700 (+$1500 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 since with online, you get one return per fee.

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...

[KrisD15]

You would split that and each claim half the payments/interest.

[TomD8]

If you paid the mortgage out of a joint account you should split the deduction 50/50.  But if you each made individual separate payments toward the mortgage, then you each would deduct the amount you actually paid.

[M58V58]

That is interesting.  I will keep this in mind if the situation arises.