My spouse and I are filing separate returns. How do we split our itemized deductions?

Answer:

  • If you and your spouse file separate returns and one of you itemizes deductions, then the other spouse must also itemize deductions. You may be able to claim itemized deductions on a separate return for certain expenses that you paid separately or jointly with your spouse. When you pay expenses from your separate funds, then only you may deduct them.
    • For example, if you pay otherwise deductible medical expenses from your separate account (or in a community property state, from an account that's your separate property under the laws of that state) then only you may claim a deduction for the expenses.
  • When expenses are paid from funds owned by both spouses, such as from a joint checking account in which each spouse has an equal interest (or from an account considered community property under the laws of the state in which the spouses reside) you should generally split the deduction equally between you and your spouse.
    • For example, if mortgage interest, on a residence both you and your spouse own, is paid from a joint checking account in which you both have an equal interest, then each spouse may deduct half of the interest expense.
    • However, if only one spouse is eligible to deduct an expense (for example, real property taxes on property owned only by that spouse), then only that spouse may deduct the expense even if it was paid from joint funds in which each spouse had an equal interest. Each spouse must maintain records documenting who is considered to have paid the expense.

My housemate and I are the legal owners of our house. We have a mortgage, secured by our house, on which we are jointly and severally liable. The house is our principal residence. We each pay one-half of the mortgage, including principal, interest, and real property taxes, from our joint account in which we have an equal interest. I receive a Form 1098, Mortgage Interest Statement, each year. The Form 1098 shows my name and social security number, along with the total amount of mortgage interest and real property taxes paid during the calendar year. How do my housemate and I reflect our respective payments of mortgage interest and real property taxes during the calendar year on Schedule A of our separate Forms 1040?

Answer:

To deduct taxes or interest on Schedule A (Form 1040), Itemized Deductions, you generally must be legally obligated to pay the expense and must have paid the expense during the year. If you’re each eligible to deduct the expenses, you can both take a deduction for your portion of the expenses. Even though two unmarried individuals who are jointly and severally liable to pay the mortgage interest and property taxes on a jointly owned house can pay the mortgage from their joint account in which they have an equal interest, the lender normally sends out only one Form 1098, Mortgage Interest Statement to one of the two legal owners. Additionally, the local taxing authority may also only provide a receipt in one owner's name.

Since your housemate and you each paid one-half of the mortgage interest and real property taxes, each of you should deduct one-half of these expenses. Individuals deduct these expenses as itemized deductions on Schedule A of their Forms 1040. Claim your deduction on Schedule A (Form 1040), line 8a, as “Home mortgage interest and points reported to you on Form 1098.” Your housemate, who didn’t receive a Form 1098, must list the amount of mortgage interest on Schedule A (Form 1040), line 8b, as “Home mortgage interest not reported to you on Form 1098” and must list your name and address as the person who received a Form 1098 reporting the interest your housemate paid. If your housemate files a paper return, your housemate should include an attachment to the paper return and print “See attached” to the right of line 8b. The attachment to the paper return should include your name and address and an explanation of how much interest each of you paid.

Taxpayers are responsible for determining the amount of mortgage interest that is and is not deductible. You and your housemate should keep records showing when you acquired your mortgage, how you used the mortgage proceeds, and how you split the mortgage interest and real property taxes. In general, you should keep your records for at least three calendar years after the later of the return filing date or the return due date. See Publication 936, Home Mortgage Interest Deduction for further information and for rules on the amount of mortgage and home equity loan interest that you may deduct within a taxable year.

 

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