Many people anticipate sizeable tax breaks upon getting married, and some will admit to pushing up their wedding date for those same reasons. However, there is nothing that guarantees you will be in a better tax situation after your marriage is official. Due to a recent IRS acquiescence of a court ruling, you might even find yourself worse off than before.
Marriage Tax Mortgage Penalty
Due to the actions of the Internal Revenue Service (IRS), when an unmarried couple files their tax returns, they can now deduct twice the amount for mortgages and home interest than a married couple. According to the tax code, each taxpayer can deduct the interest on any mortgage debt amount up to $1.1 million – this is technically $1M in mortgages and another $100,000 in home equity loans. However, the IRS insists that this $1.1M limit is actually something that is applied per residence and not per taxpayer.
A domestic couple in California (unofficially called Voss & Sophy v. Commissioner of Internal Revenue) actually sued to be able to effectively double their deduction limit, as the law seemed to state was allowed. After losing the lawsuit and appealing, the United States Court of Appeals for the Ninth Circuit eventually sided with the same-sex couple. It was a pretty significant victory, as it determined that each of them should get their own mortgage deduction limit.
The IRS decided to acquiesce the ruling, though, and applied it only to those in similar situations. As it stands today, couples that are unmarried, even technically so, can deduct up to $2.2M in interest for mortgages and home equity loans they share. On the other hand, a married couple is bound to only half that amount.
For more information regarded family law and how it interacts with tax law, contact Rita M. Boyd, P.C. An Addison family law attorney from the firm can help address your questions and concerns, and even represent you in a family law case of your own.