23 Jun We are married but file separately. What happens with home deductions?

Q. I am married filing separately and have a New Jersey property tax deduction. However, my house is not jointly owned with my husband. He lives there now that we are married but the house is fully in my name and I am paying the mortgage and taxes. Can I deduct 100% of the property taxes or must I by law only deduct 50%?

— Married

A. There are several items to consider.

When filing married filing separately, expenses are deductible only by the spouse who pays them, said Christine Melilli, a certified public accountant with Smolin, Lupin & Co. in Red Bank.

Therefore, a home mortgage interest deduction would be claimed by the person who made the payment, she said.

“Since you are making all the mortgage and real estate tax payments from your own funds, you are entitled to claim a deduction for the full expense,” she said. “However, if the mortgage interest and real estate taxes were paid from a joint checking account, the deduction should generally be split between the two spouses.”

That being said, deductions on a married filing separately tax return can be tricky, Melilli said.

First, she said, it should be noted that if one spouse itemizes on Schedule A, then both spouses must itemize. This is to avoid a situation where one spouse benefits from itemizing the couple’s deductions, and the other spouse receives the full benefit from taking the standard deduction, she said.

Second, there are limitations on the deduction of mortgage interest expense as it relates to the mortgage indebtedness thresholds.

“Since the enactment of the Tax Cuts and Jobs Act, the mortgage interest deduction for a married filing joint tax return is capped at indebtedness equal to $750,000,” she said. “In the case of a filing married separate tax return, each spouse’s debt allocation limitation is $375,000.”

Therefore, she said, you will want to consider the amount of your loan when determining whether a married filing separate situation will benefit you.

Similarly, the maximum New Jersey real estate tax deduction of $15,000 is cut in half on a married filing separate return, she noted.

“While I do not know why you and your husband have chosen to file separate income tax returns, it should be noted that you could potentially wind up with a higher total income tax as a result,” she said. .

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This story was originally published on June 23, 2023.

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