The IRS recently released guidance indicating that it will follow the Ninth Circuit's ruling in Voss v. Commissioner, 796 F.3d 1051 (9th Cir. 2015), acquiescing to the Ninth Circuit's opinion that unmarried domestic partners are each individually entitled to deduct interest on up to $1,000,000 of home acquisition debt and $100,000 of home equity indebtedness. See IRS Action on Decision 2016-02 (August 3, 2016). The IRS's acquiescence provides much needed clarity in a developing area of law. For more information on the facts and decision in the Voss case, please click here.
A taxpayer can deduct interest payments attributable to up to $1,000,000 of acquisition indebtedness (attributable to the purchase of a residence) and up to $100,000 of home equity indebtedness (attributable to a loan secured by the home but unrelated to the acquisition). For married taxpayers filing separately, each taxpayer can deduct interest payments attributable to up to $500,000 of acquisition indebtedness and up to $50,000 of home equity indebtedness.
In the guidance, the IRS has made it clear that if co-owners are not married, the debt limitations are applied separately to each owner. As a result, non-married co-owners are entitled to greater home mortgage interest deductions than married taxpayers.
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