How to Deduct Taxes on a Joint Mortgage

A joint mortgage offers many benefits for married individuals or those in a domestic partnership. Typically, a lender will require this type of formal arrangement between the two borrowers to approve a joint mortgage application. A joint mortgage application uses a combined income of both applicants so the limits of the mortgage can be expanded.

Debt vs. Ownership

There is a large difference between who is listed as a borrower on a mortgage and who is listen as the owner of a property. In most cases, the names on the mortgage loan will be the same as the names on the deed to the house, however. The home deed is typically prepared and filed by the lender during the process of closing the mortgage and the sale of the home. Once two names are on the deed and two names are on the mortgage, both parties have equal claim to the equity and equal responsibility for the debt. There is not a primary borrower on a joint mortgage. This means both parties will have a right to deduct the interest paid on the mortgage from their taxes. If only one person is making mortgage payments, then the process can get complicated.

Married Filing Jointly

Luckily, this does not tend to get too complicated because most married couples file jointly. This is a more efficient way of handling the filing process, and it also offers several competitive advantages that create a lower tax bracket in nearly all cases. When two people with a joint mortgage are filing jointly, they will fill out only one form 1098, which is a mortgage interest statement. A married couple filing jointly may deduct interest payments on the first $1,000,000 of a home loan. The debt must be secured against a property. Home equity loan debt interest may also be deducted, but there is a lower limit for this form of debt. That limit is $100,000, and the loan interest can not be deducted if it was used to acquire a separate property.

Married Filing Separately

Those who are married filing separately will have a more complicated tax schedule when it comes time to report mortgage interest deductions. The same $1,000,000 limit applies, but this time it is split down the middle, so each person can only deduct interest paid on the first $500,000 of any loan. You will each have to fill out a 1098, and you will attach a statement explaining your spouse also filled out a 1098 for this mortgage interest.You have to show how much interest you individually paid. You can deduct only your share of the interest paid. You and the other parties will have to assure each person has come to an understanding of what the other person will be deducting. The total deducted cannot exceed the interest paid that year on the mortgage debt. You will also have to include the name and address of the person who received the form. You can still even deduct your mortgage insurance, but this again can only be the share you paid.