Can Two Friends Both Claim the Mortgage Interest Deduction?
You and your best friend bought a house together.
You combined your savings.
You qualified for a mortgage.
You agreed on how much each person would contribute toward the monthly housing expenses.
Now it’s time to start thinking about taxes.
Your mortgage lender sends out Form 1098, the Mortgage Interest Statement.
There’s just one problem.
Only your friend’s name appears on the form.
Does that mean your friend gets the entire mortgage interest deduction?
Can you claim half?
Does your ownership percentage determine the amount?
And what if you contributed more toward the mortgage than your co-owner?
These questions are particularly important for people buying real estate together without being married.
Because while the mortgage may be shared, your individual federal tax returns are separate.
The good news is that both unmarried co-owners may qualify for mortgage interest deductions, even when only one person receives Form 1098.
But eligibility depends on the actual financial arrangement, the relevant tax requirements and whether itemizing deductions makes sense for each person.
If you’re considering buying a house with a friend, understanding how mortgage interest and property tax deductions work can help you establish better financial records from the beginning.
Here’s what co-buyers should know for the 2026 tax year.
Can Two Unmarried Co-Owners Both Deduct Mortgage Interest?
Yes, potentially.
The Internal Revenue Service specifically addresses situations where unmarried individuals jointly own a home, share mortgage obligations and pay housing expenses together.
Under the IRS guidance for unmarried co-owners, qualifying owners can each deduct their respective portions of eligible mortgage interest and property taxes.
The IRS provides an example involving two unmarried homeowners who are jointly responsible for the mortgage.
Both contribute equally through a shared account.
Only one receives Form 1098.
In that situation, the IRS explains that each qualifying owner should deduct half of the eligible expenses. IRS
That is useful news for friends, siblings and unmarried partners purchasing together.
But there is an important condition.
The amount each person can claim depends on the eligible expenses attributed to that person under tax law.
It is not simply a matter of deciding which tax return would benefit most.
Does Ownership Percentage Determine Your Mortgage Interest Deduction?
Not automatically.
This is one of the biggest misunderstandings among co-buyers.
Suppose Maya and Jordan jointly purchase a home.
Their ownership percentages are:
Maya: 50%
Jordan: 50%
That means they hold equal ownership interests under their chosen title arrangement.
But they do not necessarily contribute equally toward the mortgage.
Imagine Maya earns more and agrees to cover 60% of the monthly housing payment.
Jordan contributes 40%.
Does the 50/50 ownership arrangement automatically require a 50/50 mortgage interest deduction?
Not necessarily.
For eligible unmarried co-owners, the tax treatment generally follows the applicable rules concerning who paid the qualifying interest.
If their actual, documented contributions differ, their potential deductions may differ as well.
That is why co-buyers should understand how tenancy in common works and document their financial contributions separately from the percentages shown on the deed.
Example: Equal Ownership, Unequal Mortgage Contributions
Maya and Jordan own a home equally.
Their annual mortgage statement shows:
Mortgage Interest Paid: $24,000
Their documented arrangement is:
Maya contributes 60%.
Jordan contributes 40%.
Assuming both qualify for the deduction and those percentages accurately reflect their eligible interest payments:
| Co-Owner | Ownership | Interest Contribution | Potential Interest Deduction Before Limits |
| Maya | 50% | 60% | $14,400 |
| Jordan | 50% | 40% | $9,600 |
| Total | 100% | 100% | $24,000 |
Maya does not automatically lose part of her potentially deductible interest merely because she owns half the property.
Jordan also cannot automatically claim half the total when his eligible payments were lower.
However, this example assumes that the payment records support the allocation and that both taxpayers satisfy the applicable deduction requirements.
More complicated arrangements should be reviewed by a qualified tax professional.
What if Only One Co-Owner Receives Form 1098?
This is a common situation.
A mortgage lender may issue one Form 1098 to a particular borrower, even though multiple people are responsible for the mortgage.
That can make tax preparation confusing.
Suppose Maya and Jordan are both named on the mortgage.
Maya receives Form 1098.
The form shows:
$24,000 in mortgage interest paid.
Jordan does not receive a separate Form 1098.
Does that mean Maya can claim all $24,000?
No.
The IRS explains that the recipient of Form 1098 should generally claim only their deductible share of the interest.
The other qualifying co-owner can report their deductible share through the appropriate Schedule A process.
How the IRS Handles Shared Mortgage Interest
Under the IRS Schedule A instructions, when multiple borrowers share mortgage interest:
The person receiving Form 1098 generally reports their eligible share on Schedule A, line 8a.
The eligible co-owner who did not receive Form 1098 generally reports their share on Schedule A, line 8b.
The second person must provide the required identifying information for the borrower who received Form 1098.
For paper returns, the IRS instructions describe an attachment explaining the allocation. IRS
Example: One Mortgage Statement, Two Tax Returns
Maya receives Form 1098 showing:
$24,000
in annual mortgage interest.
The owners have documented that Maya paid:
$14,400
and Jordan paid:
$9,600.
Assuming those amounts are eligible:
Maya reports her deductible portion under the applicable instructions for interest shown on her Form 1098.
Jordan reports his deductible portion using the process for interest included on someone else’s Form 1098.
Neither person should assume the full $24,000 belongs on their individual return.
The combined deductions must reflect the eligible expenses actually attributable to the taxpayers.
The final reporting instructions for tax year 2026 should be checked when preparing returns in 2027.
Can One Co-Owner Claim All the Mortgage Interest?
Sometimes, if that person actually paid all the qualifying interest and satisfies the applicable tax requirements.
But there is an important distinction.
Imagine Maya and Jordan share a mortgage equally.
They each pay half the interest.
Jordan decides to take the standard deduction because itemizing would not benefit him.
Maya wants to itemize.
She asks:
“If Jordan isn’t claiming his half, can I claim all of it?”
The answer is generally no.
Jordan’s decision not to itemize does not automatically transfer his eligible deduction to Maya.
Maya cannot simply claim interest Jordan paid because it would produce a better tax result.
The tax treatment must reflect the actual eligible payments and other applicable requirements.
What if Maya pays the entire mortgage?
Now consider a different situation.
Maya is legally responsible for the mortgage.
She is an owner.
She makes all the mortgage payments from her own funds.
Jordan contributes nothing toward the mortgage during the year.
Maya may be entitled to deduct the full amount of qualifying interest she paid, subject to the applicable limitations.
But the owners should maintain clear documentation.
The mortgage’s legal structure, source of payments and actual financial arrangement all matter.
Do Both Friends Have to Itemize Deductions?
No.
Two unmarried co-owners generally evaluate their federal income tax deductions separately.
One person may benefit from itemizing.
The other may be better off taking the standard deduction.
This is one reason co-buyers should not assume that purchasing a home automatically creates a tax benefit.
Standard Deduction Amounts for 2026
According to the IRS’s published 2026 tax adjustments, the standard deductions for tax year 2026 are:
| Filing Status | Standard Deduction |
| Single | $16,100 |
| Married Filing Jointly | $32,200 |
| Head of Household | $24,150 |
| Married Filing Separately | $16,100 |
These are the base standard deduction amounts. Additional amounts and other rules may apply in certain circumstances. IRS
For friends who file as single individuals, the comparison is straightforward.
Each person should evaluate whether their eligible itemized deductions exceed the standard deduction available to them.
Example: Maya and Jordan’s 2026 Taxes
Suppose Maya and Jordan jointly own their principal residence.
During 2026, they pay:
Mortgage Interest: $24,000
Qualifying Property Taxes: $10,000
Their documented expense contributions are:
Maya: 60%.
Jordan: 40%.
Assuming both are eligible to deduct the allocated amounts and no additional deduction limitations reduce them:
| Expense | Maya | Jordan |
| Mortgage Interest | $14,400 | $9,600 |
| Property Taxes | $6,000 | $4,000 |
| Total Potential Itemized Expenses | $20,400 | $13,600 |
Now compare those amounts with the 2026 standard deduction of $16,100 for a single filer.
Maya’s eligible expenses in this simplified example exceed the standard deduction.
Jordan’s do not.
Maya may benefit from itemizing.
Jordan may benefit more from the standard deduction, assuming he has no additional itemized deductions that change the comparison.
But Maya cannot claim Jordan’s $13,600 merely because Jordan chooses the standard deduction.
The eligibility and payment rules still apply.
This is why tax planning is an individual decision, even when homeownership is shared.
Can Two Co-Owners Both Deduct Property Taxes?
Potentially.
Mortgage interest is only one homeownership expense that may qualify for an itemized deduction.
Eligible state and local real property taxes can also be deductible.
Under the IRS’s guidance for unmarried co-owners, each person may deduct their eligible portion of qualifying property taxes when the applicable conditions are satisfied.
Again, the amount generally depends on the qualifying expense each person is treated as having paid.
Example: Unequal Property Tax Contributions
Maya and Jordan receive an annual property tax bill of:
$10,000
They agree to contribute:
Maya: $6,000.
Jordan: $4,000.
They make those payments and maintain records documenting the contributions.
Assuming the taxes are deductible and both individuals satisfy the requirements, the amounts can form part of their respective itemized deductions.
But there is another rule to understand.
The 2026 State and Local Tax Deduction Limit
According to the IRS’s current tax computation guidance, the general state and local tax deduction limit for tax year 2026 is:
$40,400
For married taxpayers filing separately, the corresponding limit is:
$20,200.
The limit can be reduced for taxpayers above specified income thresholds, subject to a statutory minimum.
The deduction also covers qualifying state and local taxes beyond real property taxes, so homeowners should not treat $40,400 as a separate allowance exclusively for their house. IRS
For co-buyers, the practical lesson is that each person’s individual tax situation matters.
Two owners can pay the same amount toward a property while receiving different overall tax benefits.
Does Paying Into a Joint Bank Account Change the Deduction?
It can affect the documentation needed to establish who paid the expenses.
Many co-buyers maintain a dedicated shared account.
Each person contributes money monthly.
The account is then used to pay:
- Mortgage principal and interest
- Property taxes
- Homeowners insurance
- HOA dues
- Maintenance
- Repairs
That can make household budgeting easier.
But it is important to distinguish the payment leaving the account from the underlying contributions made by each person.
Example: Shared Property Account
Maya transfers:
$2,400 monthly
into the property account.
Jordan transfers:
$1,600 monthly.
The account is used to pay the agreed housing expenses.
Their contributions are documented.
At tax time, they need to determine how much qualifying mortgage interest and property tax each is treated as having paid.
It would be risky to simply assign deductions arbitrarily based on which person’s tax return benefits most.
They should review the actual account records and applicable tax rules.
Keep the Records
At minimum, co-buyers should preserve:
- Mortgage statements
- Form 1098
- Property tax statements
- Bank transfer records
- Joint-account statements
- Payment confirmations
- Closing documents
- Their written contribution agreement
These records help establish the financial arrangement.
The IRS recommends maintaining documentation showing how unmarried co-owners divided mortgage interest and property taxes.
What if Only One Person Is on the Mortgage?
This is another important situation.
Imagine Maya and Jordan jointly own a property.
Both are listed on the deed.
But only Maya is named on the mortgage note.
Jordan contributes toward the monthly mortgage payment.
Can Jordan deduct the mortgage interest he pays?
Possibly, depending on the complete circumstances.
The federal tax regulation governing interest paid by legal or equitable owners recognizes that interest paid by a legal or equitable owner on a mortgage secured by the property may be deductible even when that person is not directly liable on the mortgage note.
However, that does not mean anyone who contributes money toward another person’s mortgage automatically qualifies. eCFR
The taxpayer must satisfy the relevant ownership, payment and other deduction requirements.
The arrangement also needs to be supported by appropriate documentation.
This is a situation where consulting a qualified tax professional is particularly useful.
What if Someone Is on the Mortgage but Not the Deed?
The opposite arrangement can also create complications.
A person may accept mortgage repayment responsibility without holding a legal ownership interest.
That does not automatically entitle them to a home mortgage interest deduction.
The requirements relating to qualifying ownership and debt must still be considered.
Co-buyers should therefore decide whose names belong on the deed and mortgage before closing.
Those decisions affect more than borrowing capacity.
They can also affect legal rights and potential tax treatment.
Can You Deduct the Entire Monthly Mortgage Payment?
No.
A mortgage payment typically includes more than interest.
Depending on the loan, it may include:
- Principal
- Interest
- Property tax escrow
- Homeowners insurance escrow
- Mortgage insurance
These components are not all treated the same way for federal tax purposes.
Mortgage principal: Generally not deductible as home mortgage interest.
Qualifying mortgage interest: May be deductible, subject to applicable requirements and limits.
Property taxes: May qualify for an itemized deduction when the tax requirements are satisfied and the taxes are actually paid.
Homeowners insurance: Generally not deductible as a personal homeownership expense.
HOA dues: Generally not deductible as personal homeownership expenses.
Special rules can apply when a property is used for rental or business purposes.
That is another reason co-buyers should review their mortgage and escrow statements instead of using the total monthly payment as the deduction amount.
Do Mortgage Interest Deduction Limits Apply to Co-Owners?
Yes.
Home mortgage interest deductions are subject to federal limitations.
Those limitations can depend on factors including:
- When the mortgage was originated
- The amount of qualifying acquisition debt
- How the borrowed funds were used
- Whether the property is a qualifying residence
- The taxpayer’s ownership and payment circumstances
For certain mortgages originated after December 15, 2017, the general federal acquisition-debt limit is $750,000, subject to applicable rules and exceptions.
Older qualifying mortgages may receive different treatment.
Unmarried co-owners with larger mortgages may need additional analysis because the debt-limit rules and allocation of interest can become more complicated.
Co-buyers should not assume that each person’s ownership percentage automatically determines the entire deduction calculation.
A tax professional can help evaluate the applicable limits for each owner.
What Are the Benefits of Planning Mortgage Deductions Before Buying?
Tax planning can provide several practical benefits for co-buyers.
Better Financial Expectations
Co-buyers understand that ownership percentages do not automatically determine their individual deductions.
More Accurate Tax Records
Documenting payments throughout the year makes it easier to identify eligible expenses.
Fewer Filing Mistakes
Owners are less likely to duplicate deductions or claim amounts they cannot support.
Better Understanding of Homeownership Costs
Co-buyers can distinguish mortgage interest, principal, property taxes and other expenses.
More Informed Financial Planning
Each person can evaluate the actual financial consequences of their arrangement instead of assuming that buying together automatically produces identical tax benefits.
These benefits matter whether the buyers split expenses equally or use another contribution arrangement.
What Are the Risks of Getting the Deductions Wrong?
The biggest risks generally come from inaccurate assumptions and insufficient records.
Claiming the full Form 1098 amount twice
Both owners should not simply copy the full mortgage interest amount onto separate returns.
Dividing deductions arbitrarily
Tax deductions should reflect the applicable legal and payment requirements.
Confusing ownership with payment responsibility
The deed and actual financial contributions serve different purposes.
Failing to document shared expenses
Poor records can make it difficult to establish who paid what.
Assuming every mortgage payment is deductible
Principal and many other housing expenses do not qualify as home mortgage interest.
Overlooking the standard deduction
Itemizing does not automatically provide a larger tax benefit.
Ignoring unusual ownership arrangements
Transactions involving non-occupying owners, rental use, LLC ownership or borrowers who are not titleholders may require specialized tax analysis.
The best approach is to keep accurate records and obtain appropriate tax advice.
Why Tax Planning Belongs in Your Co-Ownership Agreement
When two people buy a home together, they already need to agree on how they will manage the property.
Who contributes the down payment?
Who pays the mortgage?
Who covers repairs?
How are ownership percentages determined?
What happens if someone cannot contribute?
Tax-related recordkeeping belongs in those conversations.
Imagine Maya and Jordan agree that Maya will contribute more toward the mortgage.
But they never establish how those payments will be documented.
At tax time, they disagree about who paid the qualifying interest.
One person believes the mortgage should be split according to ownership.
The other believes it should be split according to monthly contributions.
Now they are trying to reconstruct an entire year of financial activity.
A written agreement can reduce that uncertainty.
Pairgap’s guide explaining what a Real Estate Prenup covers describes how co-buyers can document ownership percentages, financial contributions, responsibilities, decision-making and exit expectations.
For tax-related planning, owners should also maintain accurate contribution records and agree on who will collect and share annual mortgage and property tax documents.
A Real Estate Prenup cannot determine which deductions the IRS will allow.
But it can help establish and document the financial arrangements that support accurate tax reporting.
What This Means for Co-Buyers
Before buying a home together, co-buyers should include tax-related financial planning in their preparation.
Ownership and Mortgage Structure
- Who will hold title to the property?
- Who will be legally responsible for the mortgage?
- Will both owners occupy the property?
- Have we discussed the tax implications of our ownership structure?
Financial Contributions
- How will mortgage payments be divided?
- Will property tax contributions follow the same formula?
- Will we use separate accounts or a dedicated shared property account?
- How will we record each person’s contributions?
- What happens if one person temporarily pays more than agreed?
Tax Records
- Who will receive Form 1098?
- How will the other owner obtain the information needed for filing?
- Who will maintain property tax records?
- Will both owners have access to annual mortgage statements?
- Have we considered the standard deduction versus itemizing?
Professional Guidance
- Do we understand the applicable mortgage interest limits?
- Have we reviewed our individual tax situations?
- Would a tax professional’s advice help us establish an appropriate recordkeeping system?
- Have we documented our financial responsibilities in a co-ownership agreement?
These conversations make shared homeownership easier to manage.
Frequently Asked Questions
Can Two Friends Both Claim the Mortgage Interest Deduction?
Yes, potentially. Unmarried co-owners who satisfy IRS requirements and itemize deductions may each deduct their eligible portions of mortgage interest. The amount generally depends on qualifying expenses attributed to each person under the applicable rules.
Can Two People Split One Form 1098?
Yes. When multiple qualifying borrowers pay mortgage interest but only one receives Form 1098, the IRS provides procedures for each person to report their eligible share. The person who did not receive the form generally reports their portion using Schedule A, line 8b, under the applicable instructions.
Does the Person Listed on Form 1098 Get the Entire Deduction?
No. Receiving Form 1098 does not automatically entitle someone to deduct all the reported interest. If multiple eligible co-owners paid the interest, each generally reports their own deductible portion.
Can One Co-Owner Claim All the Interest if the Other Takes the Standard Deduction?
Not simply because the other person takes the standard deduction. The deduction generally follows the applicable ownership, liability and payment requirements. One owner’s decision not to itemize does not automatically transfer their eligible interest deduction to someone else.
Can Unmarried Co-Owners Both Deduct Property Taxes?
Potentially. Each qualifying co-owner may deduct eligible real property taxes attributed to their payments, subject to applicable federal deduction limits and other requirements. The amount is not automatically determined solely by ownership percentage.
Can I Deduct Mortgage Interest if My Name Is on the Deed but Not the Mortgage?
Possibly. Federal regulations recognize circumstances in which a legal or equitable owner may deduct qualifying mortgage interest they pay even without being directly liable on the note. The full ownership, payment and tax requirements must be considered.
Do Both Co-Owners Have to Itemize?
No. Unmarried co-owners generally evaluate their deductions separately. One person may benefit from itemizing while the other takes the standard deduction. Both must follow the rules governing which expenses they are eligible to claim.
Disclaimer: This article is for educational purposes only and does not constitute tax, legal, mortgage or financial advice. Federal tax deductions, filing requirements, ownership arrangements, mortgage interest limits and documentation requirements depend on individual circumstances and applicable law. Consult a qualified tax professional before determining your deductions or filing a tax return.
Keep Your Contributions Clear From Day One
When you’re buying a home with someone, you’re sharing more than the mortgage.
You’re sharing property expenses.
Financial responsibilities.
And decisions that can affect both people for years.
How much will each person contribute?
How will those payments be recorded?
What happens if someone starts paying more than their agreed share?
Will additional contributions affect ownership?
And how will you handle disagreements about financial responsibilities?
Those are questions worth answering before closing.
Pairgap’s Real Estate Prenup helps co-buyers document ownership percentages, financial contributions, recurring responsibilities, buyout procedures and exit expectations.
It gives you a framework for understanding your shared financial commitments and recording what you’ve agreed to.
The agreement does not replace professional tax advice or determine which deductions the IRS will allow.
It helps establish the financial arrangement behind your shared homeownership.
Buy real estate together. Keep the numbers clear. Protect the partnership.
