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In the US, if I obtain a mortgage in my name, can my wife (who contributes to the downpayment/mortgage payment) claim the interest deduction on her taxes?

A lot of sources I'm finding online say 'No'. But a few say 'Yes'. Can anyone provide a definitive answer?

(Assume that my wife either has a lot of debt, bad credit or both. To the point that adding her to the mortgage results in a worse interest rate. Also assume we file taxes separately, and that the same deduction would result in more tax saving applied to her tax return than to mine.)

  • Is your wife on the title? – user662852 Dec 15 '15 at 2:02
  • @user662852 - Good question. Yes, she will be on the title. – Rob P. Dec 15 '15 at 16:23
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If this is her primary residence and the mortgage is secured by it - then yes, she can deduct the mortgage interest.

The caveat: she has to either be on the title, or on the mortgage.

Source: 26 USC Sec. 163(h)(3). IRC Section 163 deals with all the interest deductions and as such is quite hard to read and follow.

In order to understand how to follow the statute, the Treasury issues regulations. Regulation 26 CFR 1-163 is dealing with the IRC section 163.

This is what the regulation 1.163-1 (B) has to tell us:

(b) Interest paid by the taxpayer on a mortgage upon real estate of which he is the legal or equitable owner, even though the taxpayer is not directly liable upon the bond or note secured by such mortgage, may be deducted as interest on his indebtedness.

Thus, the answer to your question, as user662852 suggested in the comment, depends on whether she's on the title (or otherwise has ownership interest, if for example it is purchased with community funds in a community property state - check with a local lawyer.).

Keep in mind that MFS rules affect what and how much deductions you can take, so you need to check carefully whether MFS is suitable for you.

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    Thank you. Maybe this should be a separate question, but if she pays the entire mortgage herself, can she declare the entire amount. I read this on the IRS website that seems to make me think she can(irs.gov/Help-&-Resources/Tools-&-FAQs/…)? – Rob P. Dec 15 '15 at 16:26
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    You'll need to check if she paid with her own money or not. If it is communal money (even if not joint account) then you have to split. – littleadv Dec 16 '15 at 4:25

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