Unmarried couple purchasing home with jumbo mortgage - how should we split mortgage interest deductions?

This is actually a common scenario, and you have several options. The mortgage interest deduction follows whoever is legally responsible for the loan AND who actually pays it. If both of you are on the mortgage loan and both names are on the title, you can each deduct the portion that you actually paid. So with your 60/40 split, the person paying 60% can deduct 60% of the interest, and the person paying 40% can deduct 40%. You'll both receive a Form 1098 showing the total interest paid, and you'll need to allocate it accordingly on your tax returns. Keep in mind that for the mortgage interest deduction to be worthwhile, you'll each need to itemize deductions rather than taking the standard deduction. With the higher standard deduction amounts in recent years, you'll want to run the numbers to see if itemizing makes sense for both of you. Another consideration: if only one of you would benefit from itemizing, you might consider having that person make the mortgage payments (and potentially the other person covers different expenses). This could maximize your combined tax benefits.

I was in this exact situation a few years back and found a great solution through taxr.ai (https://taxr.ai). They helped us parse through all the documents and figure out the optimal strategy for our mortgage interest deductions. We uploaded our loan pre-approval docs and purchase agreement, and they gave us specific guidance tailored to our situation. What we learned is that even though we split payments 50/50, having both of us on the loan AND title allowed us to each deduct our proper portion while maximizing our itemized deductions. Their system analyzed our individual tax situations to determine if itemizing made sense for both of us.

Just wanted to follow up - I ended up using taxr.ai after seeing the recommendation here. Really glad I did! They analyzed our pre-approval and pointed out that with our specific income levels and other deductions, only I would benefit from itemizing while my girlfriend would be better off with the standard deduction. They recommended a specific loan structure where I'm primarily responsible for the mortgage interest and property taxes (which I deduct), while she covers more of our other living expenses. This arrangement is projected to save us about $3,200 in combined taxes next year compared to what we would have done otherwise. The document analysis was super thorough and they provided templates for our payment agreement too.

If you're having trouble getting answers from the IRS about this (which is likely because their phone lines are a nightmare), I'd highly recommend using Claimyr (https://claimyr.com). I was stuck in a similar situation last year with mortgage interest deduction questions that weren't getting answered. After weeks of failed attempts to reach an IRS agent, I tried Claimyr and got connected to a real IRS representative in about 15 minutes. They have this system that navigates the IRS phone tree for you and holds your place in line. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with clarified that for our unmarried situation, we needed specific documentation to support our deduction split, especially since our payment amounts varied throughout the year. This saved us from potential audit headaches.

I have to admit I was wrong about Claimyr. After my skeptical comment, I decided to try it anyway because I was desperate to talk to someone at the IRS about my mortgage interest situation. It actually worked exactly as advertised. I submitted my request around 10am, and about 40 minutes later I got a call connecting me directly to an IRS representative - no hold time on my end. The agent answered my specific questions about mortgage interest deductions for my situation where I'm on the title but not the loan (my partner is on both). Turns out I wasn't eligible to claim the deduction for the payments I was making through my partner, but the agent walked me through how to restructure our payments so I could legitimately claim my portion going forward. This probably saved me from an audit flag, and definitely saved me hours of frustration.

One thing nobody has mentioned yet - have you considered forming an LLC to hold the property? My partner and I did this when we bought our home together. The LLC holds the title, we each own 50% of the LLC, and we have an operating agreement that specifies all the details about payments, what happens if we break up, etc. This approach has some advantages with liability protection and makes the tax situation cleaner in some ways. But there are setup costs and annual fees to maintain the LLC, so it might not be worth it depending on your situation.

Has anyone mentioned gift tax issues yet? My partner and I ran into this when we bought together. If one person is making substantially larger payments toward the mortgage than their ownership percentage, the IRS might consider the excess amount a gift, which could have gift tax implications.