As exciting as it is to become a homeowner, it also comes with a few financial and tax-related considerations. One of these considerations is the deduction of mortgage interest on your tax return. If you and your partner are unmarried and own a home together, you may be wondering if one person can claim all of the mortgage interest on their tax return. The answer is not a simple yes or no, and it is essential to understand the rules and potential implications before making any decisions.
Joint Ownership and Mortgage Interest
As you mentioned, you and your partner are both on the mortgage, which means you are both responsible for the loan. In this case, you are considered joint owners of the property. According to the IRS, if you are joint owners, each person can deduct the mortgage interest on their tax return as long as they meet the ownership and debt requirements.
The ownership requirement states that you must have an ownership interest in the home. As joint owners, you both meet this requirement. The debt requirement states that you must be legally obligated to pay the mortgage. Since you are both on the mortgage, you also meet this requirement.
However, the IRS also mentions that if you are not married, you cannot both claim the same mortgage interest on your tax returns. This means that you and your partner will need to determine how to split the mortgage interest deduction between the two of you.
Splitting the Mortgage Interest Deduction
Since you are both responsible for the mortgage, you may decide to split the mortgage interest deduction equally between the two of you. In this case, each person would report 50% of the mortgage interest they paid on their tax return. This is the most common approach for unmarried individuals who own a home together.
However, if one person pays more of the mortgage or contributes more towards homeownership expenses, they may be entitled to a larger portion of the mortgage interest deduction. In this case, you and your partner will need to come to an agreement on how to split the deduction based on your individual contributions.
It is important to note that the total mortgage interest deduction claimed by both individuals cannot exceed the total amount of mortgage interest paid. This means that if one person claims more than 50% of the mortgage interest, the other person cannot claim any of the remaining interest.
Talking to a Tax Advisor
As you mentioned, if one person claims all of the mortgage interest, it would be well above the standard deduction. In this case, it may be beneficial to speak with a tax advisor to determine the best course of action for both of you. They can help you understand your options and potential tax implications based on your specific situation.
It is also important to keep in mind that these rules may change once you are married. If you continue to own the home and file your taxes separately, you will still need to follow the guidelines mentioned above. However, if you choose to file jointly, you will need to split the mortgage interest deduction equally between the two of you.
The Bottom Line
In conclusion, as an unmarried individual owning a home with your partner, you can both claim the mortgage interest deduction as long as you meet the ownership and debt requirements. However, you will need to determine how to split the deduction between the two of you. It is essential to understand the rules and potential implications of claiming the mortgage interest deduction before making any decisions. Consider speaking with a tax advisor to ensure you are maximizing your tax benefits and meeting all requirements.