Turbo program is wrong. It caps married filing separately to $5K for house tax. If one spouse pays all from sole account it should be full $10K. So says IRS. How to fix?

If you look on schedule A (Itemized Deductions) it states on line 5(e) that the tax deduction is limited to $5,000 if you file married-separate.

 

 

Here is a link to schedule A:  Schedule A

From what I read- that may be a mechanical implementation of a form that is contradicted by the IRS website (which is dated 4 Nov 2021 thus after changes in the law). hrblock agrees with the IRS that $10K cap can be provided to the person who pays the tax when filing married separately (no co-mingled funds, one spouse pays for all; and in my case - the house is only in my name). 

 

btw: Turbo tax gives me 100% credit for the mortgage interest.  logic breakdown if not 100% for SALT on the home taxes 

 

see IRS and hrblock links below

 

Question: how to get Turbo Tax to fix their program?

 

thanks

https://www.irs.gov/faqs/itemized-deductions-standard-deduction/other-deduction-questions/other-deduction-questions

https://www.hrblock.com/tax-center/filing/adjustments-and-deductions/married-filing-separately-and-mortgage-interest/

 

 

The way I see this issue, if it were to be argued in Tax Court:

 

We agree if Married Filing Separate, then both Itemize or both take the Standard Deduction

TRUE

 

"If you and your spouse file separate returns and one of you itemizes deductions, the other spouse must also itemize, because in this case, the standard deduction amount is zero for the non-itemizing spouse."

 

We agree that one taxpayer may claim more deductions than the other, TRUE

 

"When paid from separate funds, expenses are deductible only by the spouse who pays them"

 

Here is where we differ, there is nothing that says one Taxpayer can claim more than 5,000 property tax paid when filing MFS, it only says one Taxpayer can only claim what they paid which might be more than the other. 

If 11,000 was paid and only one spouse paid it, that spouse could claim 5,000 and the rest is lost. 

In fact, if a friend were to pay your property tax NO ONE could claim that as a deduction. The tax must be on YOUR home and paid by you. 

 

The HR link talks about mortgage interest.  That deduction amount is not limited, so has no bearing on this issue. 

The issue is Property tax. 

 

"The deduction for state and local taxes, including real estate taxes, is limited to $10,000 ($5,000 if married filing separately). See the Instructions for Schedule A"

 

So Yes, when filing Married Filing Separate, one spouse may claim more in property taxes paid if that spouse paid it from separate funds, but only up to 5,000.  

 

IRS FAQ

IRS Pub 530

Schedule A

I think the concept $5K per your statement is incorrect.  HRblock says all mortgage interest AND property taxes (no limit).  the IRS says the same in the FAQ of 4 Nov 2021 (thus after the law written about $5k/10k if married filing separate/jointly).

I think Turbo has it wrong and I need to over-ride the programming.

How to do?

thanks

 

ps., I think the Turbo program is written in a general manner ... it ignores fact specific circumstances allowed per the IRS - whether 'property' taxes or interest deduct.

extract from the IRS 4 Nov 2021 FAX on MFS and itemized.  I am the sole owner of the home and we segregate all finances .  The IRS form you cited seems clearly designed for joint ownership and co-mingled funds; this is not my situation.  Does that change your opinion?

Question: how to over-ride TT>?. I will deal with IRS myself.  Or do I need to use another online service?

 

• However, if only one of you is eligible for a deduction for an expense (for example, real estate taxes on a property owned only by the eligible spouse), only the spouse who is eligible for the deduction is allowed to claim it, even if the expense is paid from joint funds. Each spouse must maintain records documenting who is considered to have paid the expense.

@markkaye_96 See 26 U.S. Code § 164(b)(6)(B) - https://www.law.cornell.edu/uscode/text/26/164

 

(6)Limitation on individual deductions for taxable years 2018 through 2025

(B)the aggregate amount of taxes taken into account under paragraphs (1), (2), and (3) of subsection (a) and paragraph (5) of this subsection for any taxable year shall not exceed $10,000 ($5,000 in the case of a married individual filing a separate return)

I saw that section of the code.  IRS has its own internal mis-interpretation issues - the code says one thing, the IRS FAQ interprets it otherwise.  The law is too broad in its language and creates confusion vis-a-vis other parts of the code.  

TurboTax definitely takes into consideration the $5K limit for State and Local Taxes for those filing Married Filing Separately.   You are confusing mortgage interest and property tax.   The HR link you included above only refers to mortgage interest.   Mortgage interest is not a state or local tax, so it is not included as part of the $5K limit for state and local taxes for MFS filing status.   Property tax or Real Estate taxes are part of that category.    See the comparison here in this FAQ.

 

The IRS does not ignore the distinction between property taxes and mortgage interest.   TurboTax takes into account all of the federal tax laws in the software including special circumstances.   But it does not appear you have a special circumstance.   If you are married filing separately, your property taxes (along with other state and local taxes) are limited to $5K.    Mortgage interest is not a state or local tax, so this rule does not apply to mortgage interest.   Mortgage interest can be limited, but by a different set of rules, see Can I deduct my mortgage?

 

You cannot override any numbers or calculations in TurboTax Online.  You can using the desktop software.    But keep in mind, if you switch to the desktop software and you do override numbers, you won't be able to e-file and any accuracy guarantees will become void.  

There are other disadvantages to filing MFS.  Is there a special reason you don't file a Joint return?   Or can you file as Head of Household?  Do you live together?  

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@markkaye_96 wrote:

I saw that section of the code.  IRS has its own internal mis-interpretation issues - the code says one thing, the IRS FAQ interprets it otherwise.  The law is too broad in its language and creates confusion vis-a-vis other parts of the code.  

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Seems pretty specific in the tax code -

 

(a)General rule

Except as otherwise provided in this section, the following taxes shall be allowed as a deduction for the taxable year within which paid or accrued:

married to non-US citizen on a special work visa for international organization.  if file the IRS paperwork for joint married - it triggers potential US taxation of her overseas assets.  right now - she does not pay US income taxes per her Visa status.

Your points are well taken.  I recognize the difference of interest payments and taxes/SALT.  My issue is the IRS interpretation/guidance opens the door to the full $10K.  The language on the IRS site interprets the law/code.

I believe the law is muddled (well, congress wrote it) and not articulated to reflect a variety of situations why file MFS.  In my case, my wife is on a US work visa (G4) that excludes her from US income taxation. If we file jointly - it triggers a whole wave of potential IRS claims to her foreign assets/income generation (potential or real).

I got married last year and got hit with this, even though I pay 100% for my house and all the real estate taxes. 

 

Susan Collins submitted a bill to address this, looks like it's not going anywhere. It ends in 2026 (will apply through 2025). Totally unfair for married couples.

 

https://www.collins.senate.gov/newsroom/collins-introduces-legislation-to-address-unfair-tax-penalty-for-married-americans

Sorry, but you are mistaken.   If you are filing married filing separately, both spouses must either itemize or both use standard deduction.   If you are itemizing, then your SALT deduction is capped at $5000 instead of the $10,000 that would be the limit on a joint return.

 

 

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-separately