Going through a divorce is difficult enough without having to worry about the tax implications of your separation.
One common question that arises is: who gets to claim the mortgage interest deduction on a jointly owned home after divorce?
Let’s break down the rules on claiming the mortgage interest deduction and how to handle tax return filing after divorcing in Minnesota.
How Divorce Affects Your Mortgage Interest Deduction
Many divorcing couples don’t consider tax implications until right before filing season. But not planning ahead on who claims deductions like mortgage interest can spur conflicts with the IRS.
The rules on claiming mortgage interest after divorce depend on your individual circumstances. It helps to review tax guidance with a divorce settlement lawyer when drafting agreements.
Here is some general info on handling the mortgage deduction after splitting up:
- If one spouse solely owned the home, only they can deduct interest paid during the marriage, even after the divorce.
- For jointly owned homes paid from a joint account, the deduction can be divided equally for the portion paid while still married.
- After the divorce date, deduction rules follow property award terms in the divorce decree, and which individual still holds ownership. If you keep co-owning, you’d each claim half. If ownership goes to just one ex-spouse, only they can take future deductions.
- If the decree requires one ex-spouse to pay the mortgage for a jointly owned home, those payments could count as deductible alimony grants instead.
Even non-principal borrowers on a joint mortgage can deduct the actual interest they paid as long as it’s split fairly.
Consult your divorce lawyer to ensure you implement deductions appropriately post-divorce. Don’t risk IRS issues by assuming old filing practices still apply.
How to Handle Tax Return Filing After Divorce
Filing taxes post-divorce often trips up formerly married couples. However, you must accurately report mortgage interest and determine the appropriate filing status.
Follow this guidance when tackling returns after legally splitting:
- Your status depends on the finalization timing. If divorced by December 31st, file single. If still married on the last day of the tax year, you can file jointly or separately.
- Gather Form 1098 showing mortgage interest paid in the tax year by either borrower. Though lenders may list one primary, both can take fair deductions.
- Document your share of interest on Schedule A even if ex got the form. Include their name/address.
- Attach statement to your return if necessary, defining the deductible amount you directly paid if unclear.
- Co-owned homes allow spouses to continue splitting mortgage interest equally if both pay.
- Sole ownership only entitles that sole filer to future mortgage interest reductions.
Incorrect divorce-related tax reporting causes unnecessary IRS headaches. Consult experts like Certified Divorce Lending Professionals to ensure handling this right. Don’t assume old filing routines still fit.
How Martine Law PLLC Can Help with Post-Divorce Tax Issues
The tax implications of divorce can be highly complex and confusing. The divorce attorneys at Martine Law are here to help you obtain optimal tax treatment in your settlement.
Having an experienced divorce lawyer working to protect your interests makes navigating divorce taxes far less stressful.
Contact Martine Law today to schedule a consultation with our legal team. Our office in Minneapolis serves families statewide.
