IRS Agrees that Domestic Partners Are Entitled to Full Home Mortgage Interest Deduction

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The IRS recently released guidance indicating that it will follow the Ninth Circuit’s ruling in Voss v. Commissioner, 796 F.3d 1051 (9th Cir. 2015), acquiescing to the Ninth Circuit’s opinion that unmarried domestic partners are each individually entitled to deduct interest on up to $1,000,000 of home acquisition debt and $100,000 of home equity indebtedness. See IRS Action on Decision 2016-02 (August 3, 2016). The IRS’s acquiescence provides much needed clarity in a developing area of law.  For more information on the facts and decision in the Voss case, please click here.

A taxpayer can deduct interest payments attributable to up to $1,000,000 of acquisition indebtedness (attributable to the purchase of a residence) and up to $100,000 of home equity indebtedness (attributable to a loan secured by the home but unrelated to the acquisition). For married taxpayers filing separately, each taxpayer can deduct interest payments attributable to up to $500,000 of acquisition indebtedness and up to $50,000 of home equity indebtedness.

In the guidance, the IRS has made it clear that if co-owners are not married, the debt limitations are applied separately to each owner. As a result, non-married co-owners are entitled to greater home mortgage interest deductions than married taxpayers.

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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