It is important to address all financial matters when drafting a marital settlement agreement, including tax issues such as mortgage interest. However, there is no hard-and-fast rule for how to handle who gets to claim the mortgage interest deduction after divorce.
Neither Washington nor Internal Revenue Service (IRS) codes address that topic specifically. Rather, couples are at liberty to handle the mortgage interest deduction in a way that works for them. Many parties in a divorce choose to use large tax deductions such as this as leverage during negotiations.
If you and your spouse cannot reach an agreement prior to trial, the judge can determine how to settle the matter. For legal advice on these types of intricate financial issues, contact Washington asset division attorney Molly B. Kenny at 425-460-0550.
Who Gets to Claim the Mortgage Interest The Year of Divorce?
Regardless of who wrote the mortgage checks each month, both spouses are entitled to half of the value of all marital assets, including mortgage interest deductions. However, the precise manner in which they split their assets is up to their (or the judge’s) discretion.
Because The IRS considers you unmarried the entire year of your divorce, you will likely need to file separately that year. The IRS does not care which party deducts the interest, so long as you only deduct the interest one time. If both of you claim the full deduction on your individual returns, you can expect a letter and possible audit from the IRS. Make sure you have your financial affairs in order prior to filing your taxes.
There are several common ways couples handle the mortgage interest deduction the year of the divorce:
- They can split it 50/50.
- One party can claim the full deduction, while other party gets to keep another marital asset of the same value.
- One party can claim the mortgage interest, while the other gets to claim another large deduction, such as charitable donations.
- One party can relinquish his fair share of the interest as a payment on retrograde or future alimony.
- Any other agreement that works for a particular couple.
Where Can I Find Advice for Settling Divorce Matters?
My team at The Law Office of Molly B. Kenny in Washington is here to help. I have been practicing law for over 35 years and have a background in litigation involving finances. I can help you come up with ideas for property division and for negotiating terms like mortgage interest deductions.
Contact me today at 425-460-0550 to set up a one-on-one consultation.