Can You Split Itemized Deductions When Filing Separate Returns?

 

by Michael Lodge

Many tax clients have made the decision to file separate returns for various issues.  The question always comes up if they can split the itemized deductions that they pay out for various deductions allowed by law.

Question: My spouse and I are filing separate returns. How do we split our itemized deductions?

Answer:

If you and your spouse file separate returns and one of you itemizes deductions, the other spouse will have a standard deduction of zero. In this situation, the other spouse should also itemize his or her deductions.

  • You may be able to claim itemized deductions on a separate return for certain expenses that you paid separately or jointly with your spouse.
  • Deductible expenses paid out of separate funds are deductible only by the spouse who pays them.
    • For example, if otherwise deductible medical expenses are paid from an account owned by one of the spouses or in a community property state from an account that is the separate property of one of the spouses under the laws of that state, only that spouse may claim a deduction for the expenditure.
  • If expenses are paid from funds owned by both spouses such as from a joint checking account or an account that is considered community property under the laws of the state in which the spouses reside, you should generally split the deduction between you and your spouse.
    • For example, you each would deduct half of the mortgage interest on your separate returns for amounts paid from a joint checking account for interest on a residence owned by both spouses that is otherwise deductible mortgage interest.
    • If however, only one of the spouses is entitled to a deduction for the expense (for example, a payment of property taxes for property owned by just one of the spouses), only that spouse is allowed a deduction for the expenditure even if the expense is paid from joint funds. Each spouse must maintain records documenting who is considered to have paid the expense.

If you have further tax questions please send them to:  tax@icontaxgroup.com