If you’re buying a home with someone else — or already have — you may be wondering how to handle your taxes.
Whether you're a first-time homebuyer or an experienced property owner, understanding the tax implications of co-ownership is essential. Taking the right steps can help ensure you file correctly and claim the deductions you’re entitled to.
This article explores how taxes work when you buy a house together and how shared records factor into the process.
Ownership Structure and Taxes
Q: Why does ownership structure matter for taxes?
A: How a home is titled affects survivorship rights and, in some cases, how expenses are shared — but it does not automatically determine how taxes are filed. Tax deductions are generally based on who paid the expense and who is legally responsible for the debt, not just how ownership is structured.
Q: What are the most common ways people co-own a home?
A: Most people who co-own a home do so as a married couple. In those cases, ownership is often structured as tenancy by the entirety or another form of spousal ownership allowed under state law.
Outside marriage, co-ownership is typically structured in one of two ways: joint tenancy or tenancy in common. The main differences relate to ownership shares and what happens if one owner dies.
Tenancy by the entirety is available only to married couples (and, in some states, registered domestic partners). It includes survivorship rights, meaning the surviving spouse automatically becomes the sole owner.
Joint tenancy can be used by spouses or by non-spouses. All owners hold equal shares and have survivorship rights.
Tenancy in common allows owners to hold unequal shares and does not include survivorship rights. If one owner dies, their share passes to their estate rather than to the other owner(s).
These distinctions are important for ownership and estate planning, but they do not by themselves determine how tax deductions are claimed.
Q: How does tenancy by the entirety affect taxes?
A: For federal tax purposes, tenancy by the entirety primarily affects how married couples report deductions, rather than which deductions are available.
Married couples who file jointly may generally deduct the full amount of mortgage interest and property taxes paid, subject to IRS limits.
If spouses file separately, deductions are typically limited to the amounts each spouse paid.
Although some states allow registered domestic partners to hold property in a similar form, domestic partners cannot file federal taxes jointly.
Q: How does joint tenancy affect tax deductions?
A: With joint tenancy, each owner may deduct the portion of mortgage interest and property taxes they actually paid, as long as they are legally responsible for the loan. Although ownership shares are equal under joint tenancy, tax deductions are based on payment, not title alone.
Q: How does tenancy in common affect tax deductions?
A: With tenancy in common, owners may hold unequal ownership shares, and deductions are based on the portion of mortgage interest and property taxes each owner paid. In many cases, payment aligns with ownership percentage, but that isn’t required — the IRS looks at who paid the expense and who is legally liable for it.
Filing Status Considerations
Q: Can co-owners file taxes jointly?
A: Only married couples can file federal taxes jointly. Co-owning a home does not, by itself, create the option to file jointly.
Unmarried co-owners always file separate federal returns, even if they share a mortgage or deed.
Q: When does filing jointly make sense for married homeowners?
A: Filing jointly often simplifies tax preparation and may allow access to broader deductions and credits. However, filing separately may be beneficial in certain situations, such as when one spouse has significant medical expenses or outstanding financial obligations that could affect refunds.
If you’re already using Trustworthy, it can help you keep medical and childcare expense records organized and accessible during tax season, especially when documents need to be shared between spouses or with a tax professional.
Mortgage Interest Deductions
Q: How is mortgage interest deducted when a home is co-owned?
A: Married couples filing jointly may generally deduct the full amount of interest paid.
Co-owners who file separately — including unmarried co-owners — may deduct the portion of mortgage interest they actually paid, as long as they are legally responsible for the loan.
Even if only one Form 1098 is issued, multiple co-owners may still deduct their respective shares. The IRS does not require Form 1098 to list every payer; deductions are based on actual payment and legal liability.
Q: Are there limits on how much mortgage interest can be deducted?
A: Yes.
For home loans taken out on or after Dec.16, 2017: Mortgage interest is deductible on up to $750,000 of mortgage debt ($375,000 if married filing separately).
Taken out before that date: The limit is $1 million ($500,000 if married filing separately).
Q: Do housing allowances affect mortgage interest deductions?
A: Certain members of the military and ordained ministers may receive housing allowances that affect how mortgage interest deductions are calculated. Because these rules are complex and fact-specific, homeowners in these situations should consult a qualified tax professional.
Mortgage Points
Q: Are mortgage points tax-deductible?
A: Mortgage points are prepaid interest paid at closing in exchange for a lower interest rate. Points may be deductible in the year they are paid if IRS requirements are met, particularly for loans used to purchase a primary residence.
If the requirements aren’t met, points may still be deductible over the life of the loan through amortization.
Property Taxes
Q: Can co-owners deduct property taxes?
A: Yes, if deductions are itemized. However, under the Tax Cuts and Jobs Act, the total deduction for state and local taxes — including property taxes — is capped at:
$10,000 for most filers.
$5,000 if married filing separately.
Each co-owner may deduct the amount of property taxes they paid. The IRS bases deductions on payment, not ownership percentage. The cap applies per tax return, not per property.
A secure digital family assistant like Trustworthy (read about Trustworthy's bank-level security) can be useful for storing property tax statements and related records that may need to be accessed across multiple tax years or shared with a co-owner or tax preparer.
Home Improvements
Q: Are home improvements tax-deductible?
A: Home improvements are not immediately deductible, but they increase your home’s cost basis. A higher cost basis can reduce capital gains tax when the home is sold.
Because improvement records may be needed years later, some homeowners choose to store receipts and supporting documents in a digital family assistant like Trustworthy so they can be retrieved when calculating capital gains.
Routine repairs generally do not increase cost basis, while capital improvements may.
Mortgage Interest Credit
Q: What is the mortgage interest credit?
A: Some first-time or lower-income homebuyers may qualify for a mortgage interest credit through a Mortgage Credit Certificate (MCC) issued by a state or local housing authority at the time of purchase.
An MCC allows eligible homeowners to claim a portion of mortgage interest as a tax credit using IRS Form 8396. MCCs are subject to income and purchase price limits and are not available in all areas.
Energy-Efficient Home Credits
Q: Are energy-efficient upgrades eligible for tax credits?
A: Homeowners who make qualifying energy-efficient upgrades after Jan. 1, 2023, may be eligible for a federal tax credit of up to $3,200 per year, generally equal to 30% of qualified expenses.
Specific caps apply to different types of improvements, and the credits are currently available through 2032.
Preparing for Tax Filing
Q: What documents should co-owners prepare for tax filing?
A: Important documents may include:
IRS Form 1098 (mortgage interest statement).
Mortgage Credit Certificate (if applicable).
Settlement statement.
Property tax statements.
Home improvement receipts.
Insurance loss documentation.
Form 8829 (only if claiming business use of the home).
Keeping track of these documents can be challenging, particularly when a home is co-owned. A shared, secure digital family assistant like Trustworthy can help co-owners organize tax records and ensure everyone is working from the same information year after year.
If you work with a tax professional, Trustworthy allows documents to be shared securely with controlled access, reducing the need to email sensitive financial information.
Frequently Asked Questions
Q: Can unmarried co-owners both claim mortgage interest deductions?
A: Yes. Each co-owner may deduct the portion of mortgage interest they actually paid, as long as they are legally responsible for the loan, even if only one Form 1098 was issued.
Q: How do co-owners split property tax deductions?
A: Each co-owner may deduct the amount of property taxes they paid. The IRS bases deductions on payment, not ownership percentage.
Q: What legal documents are required when co-owning a home?
A: Common documents include the deed or title and, in many cases, a written co-ownership agreement outlining ownership interests and financial responsibilities.
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