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 and both have responsibility for paying the mortgage.
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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, so it's easy to list the amount on your tax return.
Most types of home loan qualify for the mortgage interest deduction. There is, however, a limit on what you can deduct. In 2021, that limit was $750,000. That means single filers and married couples filing jointly can deduct the interest on up to $750,000 of mortgage debt. Married taxpayers filing separately can deduct up to $375,000 each.
Consider also: Mortgages & Taxes: What You Need to Know
Mortgage Interest for Unmarried Individuals
There is not specific unmarried mortgage interest deduction. 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 and divorced couples.
Splitting Mortgage Interest on Taxes
The IRS does make an exception to the rule for unmarried filers if both individuals are listed on the title of the home, have a responsibility to pay the mortgage, and both made interest payments during the relevant tax year. In that scenario, they may choose to split the deduction.
To do this, each individual must attach a written 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.
Consider also: Deducting Mortgage Interest on a Second Home
Considerations for Unmarried Individuals
The mortgage interest deduction is an itemized deduction, and you claim it on Schedule A of Form 1040. This means you will have to forego the standard deduction when file your tax return. 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.
Consider also: Standard Deduction: How Much Is It, When to Take It & How to Use It
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.