High-earning professionals and people who own property in some of the country’s most expensive markets will be the beneficiaries of an unexpected new twist in the IRS’s policy towards homeowners.
Home-owning couples who are considering marriage or the timing of their divorce should take note that the federal tax code has moved to favor unmarried partners with high mortgages.
Under Section 163 of the Internal Revenue Code, taxpayers can deduct interest on both a first and second home up to a combined limit of $1.1M in debt. Those married and filing separately enjoy only half of those deduction benefits.
Since 2012, when an unmarried couple in California who jointly owned two houses with big mortgages, argued that the $1.1M limit should not be split between unmarried partners, the US Tax Court has been slowly acquiescing to arguments that the limit should be on a per-taxpayer basis (the case was appealed and won). The IRS too has accepted these arguments, meaning that the limit should be $2.2M in total, adding significant muscle to the investing power of joint home-owners with expensive mortgages, whether these be couples or single people investing in property together.
Now is the time to review your situation if you are divorced, considering divorce, considering marriage, or about to buy property with a co-owner. At Valanzola Law Group, we are experts in real estate and property matters. Matthew Valanzola has ten years of experience in commercial real estate, while Edward Valanzola has over 35 years of experience of practicing law with a focus on real estate matters. We are committed to providing advice tailored to your individual needs. Please contact us today.