Tax Deductions for Married Couples With Two Households
A number of tax deductions are available to homeowners that may not be available to other taxpayers, such as the mortgage interest deduction and the property tax deduction. Many of the same deductions that are available to married couples who maintain one household are also available to married couples who maintain two households.
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Mortgage Interest
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One of the largest tax breaks for homeowners is the mortgage interest deduction. The Internal Revenue Service allows you to fully deduct the mortgage interest on home loans taken out after October 13, 1987. The good news for married couples with two households is that this deduction is available for mortgage loans on both a first and second home. The mortgage interest may not be fully deductible if the mortgage balance exceeds $1 million. You can usually also deduct premiums for mortgage insurance that is required by your mortgage lender.
Real Estate Taxes
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A married couple who maintains two households can deduct any real estate taxes paid on both properties during the year. No limitation exists on the real estate deduction, regardless of the value of the property or the amount of the real estate taxes. You can only deduct the amount of real estate taxes that you actually paid to the taxing authority during the year. You cannot deduct money paid into an escrow account that was not paid to the taxing authority, nor can you cannot deduct real estate taxes paid in advance of the tax year on your current year's income tax return.
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Repairs and Improvements
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Maintaining multiple households can significantly increase your cost of keeping your homes in good repair. The Internal Revenue Service considers common repairs needed to maintain your homes, such as patching a leaky roof or replacing light fixtures, to be non-deductible expenditures. The IRS considers major renovations, such as replacing the entire roof, rewiring the whole house or adding a room, to be improvements that are also non-deductible, but you may add the cost of improvements to the basis of the home, which may reduce your taxable capital gains if you sell the home.
Reporting
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You can only take deductions for your home mortgage interest and real estate taxes on multiple homes if you itemize your deductions when you file your federal income tax return. You cannot take these deductions if you claim the standard deduction. Report the combined total of the real estate taxes you paid for the tax year on both households on line 6 of Schedule A, Form 1040, while reporting your combined mortgage interest and points on lines 10, 11 and 12 of Schedule A, Form 1040. Report your mortgage insurance premiums on line 13 of Schedule A, Form 1040.
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References
- Internal Revenue Service: Publication 501 Exemptions, Standard Deduction, and Filing Information (pdf)
- H&R Block: Second-Home Deductions
- Internal Revenue Service: Schedule A (pdf)
- Internal Revenue Service: Publication 936 Home Mortgage Interest Deduction
- Internal Revenue Service: Tax Information for Homeowners (pdf)
