The mortgage interest deduction often is a valuable tax break for homeowners. Married couples who file jointly report the entire interest payment on one tax return. The situation is slightly more complicated for unmarried filers. Normally, only one of the two unmarried individuals can take the deduction. However, you can choose to split the deduction if you're both on the title.
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Mortgage Interest for Married Couples
Along with real estate taxes, homeowners may deduct their mortgage interest expense. This comprises the interest portion of the mortgage payment, loan origination fees and points purchased to lower your interest rate. Each year, lenders send an annual Form 1098 to homeowners detailing how much of their payments are tax deductible. Married couples who file a joint return can deduct the entire amount listed on Form 1098 on line 11 of Schedule A.
Mortgage Interest for Unmarried Individuals
If you're unmarried, normally only one person can claim the mortgage interest deduction even if you both made payments. According to IRS Publication 530, the person whose name and Social Security number is listed on the Form 1098 is the one who should claim the deduction. This rule applies to unmarried individuals, divorced couples and same-sex couples. Even if your state recognizes a same-sex union, the mortgage interest deduction is a federal level deduction, so only one of the partners can claim it.
Splitting the Deduction
The IRS does make an exception to the rule for unmarried filers if both individuals are listed on the title of the home and both made interest payments. In that scenario, they may choose to split the deduction. To do this, each individual must attach a statement that itemizes how much interest each individual paid. The individual who didn't receive the Form 1098 should name the person who originally received the 1098 on the return. Write the amount of interest you're deducting and the phrase "see attached" on line 11 on Schedule A.
Considerations for Unmarried Individuals
The mortgage interest deduction is an itemized deduction, which means you must forgo the standard deduction to take it. If you don't have any other itemized deductions and you can only claim half of the total mortgage interest paid, your total itemized deductions may not exceed the standard deduction. In that case, it doesn't make sense to itemize.
You may net a larger tax deduction between the two of you if only one person takes the entire mortgage interest deduction. Even if you're both on the title, you're not obligated to split the deduction.