9112 / Does the marital status of two individuals who own property together impact the ability to deduct mortgage interest?

However, unmarried taxpayers may be entitled to double this generally applicable limit. In a case decided prior to tax reform, the Ninth Circuit reversed a Tax Court holding that two unmarried home co-owners could not each deduct interest on $1.1 million of personal residence indebtedness, because the debt limitations are residence-based, rather than taxpayer-based. The Tax Court found that the taxpayers could deduct only the interest incurred on a total of $1.1 million of debt ($1 million of acquisition indebtedness and $100,000 of home equity indebtedness), even if they owned two residences. The Ninth Circuit reversed this decision, holding that the debt limit applied on a per-taxpayer basis to unmarried co-owners of a qualified residence.³ The IRS acquiesced in the Ninth Circuit’s decision in 2016.⁴ This generally means that unmarried taxpayers should be entitled to deduct interest on up to $750,000 of debt each from 2018-2025.