Do we split outstanding mortgage principle if splitting the interest in half? Filing as MFS & both names are on 1098 but outstanding principle is over 500k (about 550K).

[skhaylomsky]

My wife and I are filing our taxes as married filing separately this year. We purchased our home in 2016 and both of our names are on the 1098. The outstanding mortgage principle is about 550K which is above the 500k threshold for married filing separately. Since we intend to split the mortgage interest by half for each of our returns, do we also split the outstanding principle so we are not penalized for it being over 500k? Or do we need to use IRS Publication 936 to calculate our allowable deductible interest since it's over 500k? 

[Vanessa · Accepted solution]

Since you are splitting the interest, you will also split the principal. You do not need to use Pub 536 to calculate the allowable deductible interest if you are splitting it 50/50 or any way that does not cause one of you to have a balance of more than $500k.  Be sure you allocate the same percent of mortgage and interest if you are not splitting it 50/50 (example 40% interest needs to have 40% of the principal reported on that return)

[plant2000]

Good evening. 

I recently posted a similar question to this thread yet received a different answer- https://ttlc.intuit.com/community/tax-credits-deductions/discussion/re-do-i-enter-the-total-mortgage... Were you (or is anyone else able to) able to confirm your answer to this originally posted question was accurate?