My girlfriend and I each own a home. Each of us have a mortgage of approximately $700,000. As two single people we are able to deduct mortgage interest on up to a $1 million principal. If we marry, do we lose a part of our deduction because together we're over the $1 million limit?

ANSWER

The BIDaWIZ Team's Answer:

By filing jointly, one home would be treated as your primary residence and the other as a second home. Combined, you can deduct interest up to $1.1 million. Thus, your mortgage interest deduction will be limited in this case. Filing as married filing separately doesn't solve the situation either as the debt limit is reduced to $500,000. This information is referenced in Section 163 of the internal revenue code.