United States · 7 min read · Laddered Editorial · 2 Jul 2026

Taxes When You Co-Own a Home: Who Claims the Mortgage Interest Deduction?

Two owners, one Form 1098, one very common April argument. How mortgage interest, property taxes and the capital gains exclusion actually work when you co-own a home in the US.

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This article is general information only and is not legal, financial, tax, or property advice. Consider advice from a qualified professional for your circumstances.

Two owners, one form

Every January, the lender sends out Form 1098 showing the year's mortgage interest — addressed to one borrower. If you co-own the place, that's the moment the questions start: does the person named on the form claim all of it? Do you split it 50/50? By ownership percentage? By who actually paid?

The IRS's answer is the last one, and it's worth getting right, because it decides real dollars every single year you own together.

The rule: you deduct what you actually paid

For unmarried co-owners filing separate returns, each person can deduct only the mortgage interest they actually paid out of their own funds. Not their ownership percentage, not an even split — what they paid. If you covered 60% of the payments this year, 60% of the interest is yours to deduct, provided you're liable on the loan and you itemize rather than take the standard deduction.

The mechanics when you're not the one named on the 1098: the named borrower deducts their share normally, and you report yours on the Schedule A line for mortgage interest *not* reported to you on a Form 1098, with a note of who received the form. Slightly awkward, entirely routine.

Two wrinkles worth knowing:

Payments from a joint account are presumed equal. If the mortgage autopays from a joint checking account, the IRS assumes you each paid half unless you can show otherwise. If your deal is 70/30, either fund the account 70/30 with records to match, or pay separately.
You can't deduct generosity. If your co-owner covered your months during a rough patch, they don't get your deduction for it — interest paid on someone else's behalf is generally nobody's deduction. Another reason to structure help as a documented loan between owners rather than quiet cover.

Property taxes follow the same logic

Same principle: each co-owner deducts the property taxes they actually paid, subject to the usual federal limits on state and local tax deductions. If one of you fronts the whole tax bill for convenience, square up in the ledger and keep the reimbursement visible, or the deduction and the reality stop matching.

The good news at sale: exclusions multiply

Here's the part co-owners rarely hear: the home-sale capital gains exclusion applies per owner, not per house. Each co-owner who has owned the home and used it as their main residence for at least two of the five years before the sale can exclude up to $250,000 of *their own share* of the gain. Two qualifying co-owners can shelter up to $500,000 of combined gain; three can shelter up to $750,000. Each person's eligibility is tested separately — if one of you moved out three years ago, that person may fail the use test while the other still qualifies.

If the property is a rental rather than a residence, different rules apply across the board — income and expenses get allocated by ownership interest, and there's no residence exclusion. (Our guide to co-owned rentals covers that side.)

The whole system runs on records

Notice the pattern: every one of these rules turns on being able to show who actually paid what. The interest deduction, the joint-account presumption, the property tax split, your share of the gain at sale — all of it is decided by the payment history. The co-owners who have a bad April are the ones reconstructing three years of "I think I paid the March one" from bank exports.

This is a large part of why Laddered keeps one shared ledger for the life of the property: every payment logged, split by the rules you agreed, visible to every owner — so at tax time the answer to "who paid what" is a report, not an archaeology project. Your co-ownership agreement sets the shares; the ledger proves them.

And the standard disclaimer, meant sincerely: this is general information, not tax advice. Thresholds shift, states differ, and your situation has details an article can't see. A one-hour session with a CPA in your first year of co-owning typically pays for itself — bring the ledger and it'll be a short hour.