Bought a house in 2023 - MFS Itemized (mortgage interest/property tax) vs Standard Deduction with student loans?

We bought our first home last year in May 2023, and I've been making all the mortgage payments since we closed. I pay all the property taxes too. My wife and I filed MFS (Married Filing Separately) for 2022 because of my federal student loan situation. We both make about the same income, and if we filed jointly my income-based repayment would basically double, which we can't afford right now. I'm trying to figure out if I should itemize deductions for 2023 to take advantage of the mortgage interest and property tax deductions since I pay them, or if we should both just take the standard deduction. If I itemize and claim all the mortgage interest and property taxes myself, will my wife be forced to itemize too? And if she has to itemize without having anything significant to deduct, would she end up worse off than if she took the standard deduction? I think the mortgage interest was around $9,400 and property taxes were $3,700 for 2023. Trying to figure out what makes the most sense for our situation. Thanks for any help!

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19 comments

Lily Young

•8M

You've got a good tax planning question there! When you file MFS, if one spouse itemizes, the other spouse MUST also itemize - even if they have little or nothing to itemize. This is one of those tax code quirks that often catches people by surprise. Let's break down your situation: Your mortgage interest ($9,400) plus property taxes ($3,700) totals about $13,100. For 2023, the standard deduction for MFS is $13,850. Since your itemized deductions don't exceed the standard deduction, you'd both be better off taking the standard deduction in this case. Remember that when filing MFS, the tax brackets are typically less favorable than MFJ, so the decision to file separately should be weighed carefully against the student loan savings.

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Lily Young

•8M

Great question! If one spouse has enough deductions to exceed their MFS standard deduction threshold, then you'll need to do the math for your specific situation. If your total itemized deductions significantly exceed your standard deduction, it might be worth itemizing despite forcing your spouse to also itemize with minimal deductions. You'd need to calculate the total tax impact for both of you combined. Run the numbers both ways - with both of you taking standard deduction versus one itemizing (with substantial deductions) and one itemizing (with minimal deductions). Compare your combined tax liability under each scenario.

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Wesley Hallow

•8M

I was in almost your exact situation last year with student loans and a new house. I found this amazing AI tax assistant at https://taxr.ai that analyzes all your documents and runs different scenarios to show which filing method saves the most money. It showed me that even though we filed MFS for student loan reasons, the difference between both taking standard vs one itemizing/one forced to itemize was about $780 in our favor for both taking standard. The tool also showed me some student loan deductions I could take even while filing separately! Totally changed our approach.

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Wesley Hallow

•8M

It's completely independent of any tax filing software - you upload your documents or even just take pictures of them, and it analyzes everything before you ever start using TurboTax or whatever you prefer. It's like having a pre-consultation that shows you the optimal approach before you start the actual filing process. I actually did verify with my tax guy afterward, and he was impressed with how accurate it was. He said the analysis caught some things he would have recommended too. The documentation it provided helped me understand exactly why certain choices were better than others given my specific situation.

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Grace Thomas

•8M

I have to admit I was totally wrong about taxr.ai. After my skeptical comment, I decided to try it myself since I'm in a similar MFS situation with student loans. The analysis showed me that in my case, unlike OP, I should actually itemize on my return (I have medical expenses plus the mortgage interest) while my husband takes the hit on his return with minimal itemized deductions. The combined savings was about $1,240 compared to both taking standard. It also flagged that I was eligible for a partial student loan interest deduction despite filing MFS because of a specific rule exception. No tax professional I've used before caught that! Definitely worth checking out for anyone juggling MFS with mortgage deductions.

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Hunter Brighton

•8M

If you're filing MFS because of student loans, you should also try Claimyr (https://claimyr.com) to get actually speak with your loan servicer about better options. I was in repayment hell trying to figure out exactly how much filing jointly would impact my payments, but could never get through to a human at my servicer. Used Claimyr's service and got connected to a loan specialist in under 15 minutes who walked me through the exact calculation AND helped me apply for a different repayment plan that actually made MFJ a better option in my case! They have a demo video showing how it works: https://youtu.be/_kiP6q8DX5c

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Hunter Brighton

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It uses a system that monitors the IRS/loan servicer phone lines and calls repeatedly using automated technology, then when it gets through, it calls you and connects you with the agent. So you're not sitting on hold - they're doing that part for you. They don't just get you to the front of the queue - they basically keep dialing until they get through and then bring you in only when there's a live person. I was super skeptical too but getting real answers about how MFS vs MFJ would affect my actual payment amounts was worth trying it.

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Lauren Wood

•8M

I'm actually embarrassed to admit how wrong I was about Claimyr. After posting that skeptical reply, I was so desperate to get loan info before filing my taxes that I tried it anyway. Got connected to MOHELA in 23 minutes (after trying for weeks on my own). The loan officer ran the exact calculation showing how MFJ would affect my payments and helped me fill out an alternative documentation of income form that actually REDUCED my payment by $172/month even with MFJ filing. This completely changed our tax strategy - we're filing jointly now and getting a much bigger refund while still keeping my loan payments manageable. Honestly wish I'd known about this service years ago. Would have saved me thousands in tax benefits I was missing by automatically going MFS without getting the full picture from my loan servicer.

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Ellie Lopez

•8M

Another important consideration with MFS vs standard deduction - if you itemize and claim the mortgage interest/property tax while your spouse is forced to itemize with minimal deductions, remember you can still split certain deductions. For example, in my state (CA), we can split the state income tax paid between spouses when filing MFS. My wife took the mortgage interest ($11K), and I took most of our state income tax deduction ($9K) so we both benefited from itemizing.

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Ellie Lopez

•8M

You're right that generally withholding is tied to each spouse's earnings. What I was referring to is that in community property states like California, income (and the taxes paid on that income) is considered equally owned by both spouses regardless of who earned it. So in states like CA, WA, TX, etc., you have more flexibility in how certain deductions are allocated when filing MFS. But you're absolutely correct that in non-community property states, you can only deduct the state taxes you personally paid.

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