Unmarried Co-Owners of Residence with > $1 Million Mortgage

Home mortgage interest is only deductible on up to $1 million of debt used to buy or improve a taxpayer’s primary residence. If two unmarried persons are co-owners of a home they both use as their primary residence, the question arises as to whether each owner has a separate $1 million limit. The IRS recently took the position (no surprise) that the $1 million limit applies per property, not per taxpayer. Therefore, the $1 million has to be split among the owners based on their percentages of ownership. IRS office of Chief Counsel Internal Legal Memorandum 200911007.

Taxpayer Can Claim Home Tax Deductions Even if Not on Title or Loan

The tax court in the Njenge case recently validated something I’ve been telling clients for years: a taxpayer can deduct personal residence mortgage interest and property taxes even though loan and/or title to the home are in someone else’s name, under the right circumstances. The person who lived in the home, made the payments, and bore all benefits and burdens of ownership is treated as the “equitable owner” and can deduct the property tax and interest payments.