Under the Tax Cuts and Jobs Act of 2017, taxpayers can only deduct interest paid on up to $750,000 of mortgage debt, down from the previous limit of $1 million.

The deduction limit for mortgage interest applies on a per-family basis. That means if you are single, you can deduct the mortgage interest on up to $750,000 of mortgage debt. If you file jointly, you do not get double the amount, as it is still $750,000. For those who file their taxes separately and are married, the limit is $375,000 for each spouse.

For unmarried co-owners, the Ninth Circuit Court of Appeals has reversed a previous decison of the Tax Court, and ruled that “§ 163(h)(3)’s debt limits apply to unmarried co-owners on a per-taxpayer basis”. That is, each unmarried co-owner can claim a mortgage interest deduction on up to $750,000 of mortgage debt. The case originated from California, where homes are expensive, but with the IRS’s acquiescence (their reluctant acceptance without protest), the decision applies to every state. Please note both of the court’s decision and the IRS’s acquiescence refer to the old limit, but the principle applies to the new limit.

Regarding how to divide the mortgage interest between two unmarried co-owners, the IRS has two rules: you had an obligation to pay, and you paid. In my opinion, if you can agree on the distribution of wealth and debt, you don’t need to involve the government or lawyers. Like many things in tax, there is no analytic solution for an optimal allocation, but your accountant should know.

This particular tax rule may seem to discourage marriage, but don’t let the IRS dictate your love life. Instead, take inspiration from the Hungarian poet Sándor Petőfi, who wrote:

Tax is truly steep
Priceless is the heart
For the sake of love
Wealth can be set ‘part

This poem serves as a poignant reminder that the value of love surpasses all riches, and we should be unafraid to devote ourselves to it.