Mortgage Tax Deduction and LGBT Couples

When you’re a same-sex couple and you’re jointly owning property and sharing finances, things aren’t always clear-cut or easy.  Lately, it seems like the laws are changing almost every day—the bans on gay marriage are being struck down, but then they’re immediately given a stay pending a review by a higher court.  This makes it very unclear whether things have actually changed or not.  One area in which many LGBT couples are confused is that of mortgage tax deduction.

LGBT Tax Deductions

Married couples or a single person with a mortgage can deduct the amount they pay every year in mortgage tax on their federal tax returns.  This has been a rather murky area for LGBT couples because even though they may both be on the mortgage, it was sometimes confusing to see how to divide the deduction.  This is especially true if they didn’t have a CPA or had a CPA who wasn’t very gay-friendly.  Two people who are not married, but share a mortgage can actually split the tax deduction—each would claim half of it.  But for some couples, this move didn’t make sense for them financially due to other factors.

However, now that the Supreme Court of the United States has ruled that the Defense of Marriage Act (DOMA) is unconstitutional, married same-sex couples can claim the deduction if they file their taxes jointly.  It doesn’t matter if the couple resides in a state with a ban on gay marriage or not—as long as they were legally married in a state that supports same-sex marriage, they can file joint federal tax returns because, now that DOMA has been repealed, the federal government must recognize their union.  They may not be able to file joint state tax returns, but mortgage interest may not be a valid deduction for state taxes anyway.  It varies from state to state.

With the changes in how marriage is defined and the differences in laws in each state, it’s no wonder some LGBT couples are confused.  When purchasing a home, be sure to ask your real estate agent how the deduction is handled in the state.  You can also talk to a CPA.  This is especially important if you’re not married and aren’t filing jointly since you may actually get a better deduction if one person claims the entire amount of mortgage tax.  This depends on many factors, though, and will be different for every couple.

Posted on August 22, 2014 in Buying a Home, Gay and Lesbian

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