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How marriage affects the mortgage interest deduction

The mortgage interest deduction provides tax savings to most homeowners. In the coastal areas in Orange County, only a portion of the mortgage interest is usually deductible.

If you are not married to your partner, you may now be able to deduct more mortgage interest on your home and any vacation properties. This change will affect those with mortgages of more than one million dollars on their home. 


Voss v. Commissioner

The 9th Circuit Court of Appeals reversed a tax court ruling in the Voss case. Now the IRS will not appeal basically acquiescing on the issue.

Unmarried borrowers now qualify for double the mortgage interest deduction of married couples who file their taxes jointly. IRS regs used to treat the unmarried taxpayer the same as a married couple imposing these limits on mortgage interest deductions:

  • $1 million dollars on their primary residence and one vacation home
  • $100,000 on a home equity line of credit

To illustrate how this works, a married couple with a home valued at $2.4 million take out a mortgage at 4 percent for $2 million. The first year they pay $80,000 in mortgage interest. They can only be able to deduct half or $40,000, because of the cap.

However, an unmarried couple will be able to deduct the full $80,000. For high income couples who have never married, but own a home together this could provide added tax savings.

If you fit into this category, you may be able even be able to amend federal and California tax returns. Take care, however, and work with a local tax attorney to ensure that you qualify for the additional mortgage interest deduction. With any change in the law, it is essential to seek experienced counsel before taking action.

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