How to Claim Tax Deductions When Co-Owning a Home: A 2026 Guide

Navigating tax deductions for a co-owned property requires understanding how the IRS allocates claims based on actual payment, not just legal ownership shares. The key to a smooth tax filing is meticulous documentation and a clear co-ownership agreement. Your deductions are based on what you personally paid for mortgage interest and property taxes, not necessarily your percentage of ownership on the deed. This guide outlines the rules for claiming deductions fairly and avoiding common IRS pitfalls.

How Does Co-Ownership Structure Affect Tax Deductions?

The legal structure of your ownership—whether it’s joint tenancy (equal, undivided shares) or tenancy in common (potentially unequal shares defined in the deed)—sets the initial framework. However, for tax purposes, the IRS primarily looks at who actually paid the expenses. If both co-owners' names are on the mortgage, each can deduct the portion of interest they paid. If only one person is on the mortgage, the other co-owner can still deduct their contribution if they can provide clear records, such as bank statements showing payments made directly to the lender or as reimbursement to the borrower. Proper documentation is non-negotiable in this scenario.

What Mortgage Interest and Property Tax Deductions Can You Claim?

The fairest and most IRS-compliant method is to base deductions on your actual financial contributions. For example, if two co-owners purchase a home and one pays 70% of the mortgage interest and property taxes while the other pays 30%, their deductions should reflect that 70/30 split, even if the deed states a 50/50 ownership. The SALT (State and Local Tax) deduction cap, which remains at $10,000 for 2026, is a critical factor. In high-tax states, co-owners may both hit this cap from other deductions, limiting the benefit of splitting property tax payments. Keeping receipts, bank records, and a written agreement is essential for substantiating your claims.

How Should You Handle Form 1098 at Tax Time?

Your lender will issue Form 1098, which reports the total mortgage interest paid during the year. If the form lists only one co-owner but both contributed, you have two options. The listed person can deduct only the portion they paid, and the other co-owner can claim their share separately using their payment records as support. Alternatively, you can request a corrected Form 1098 from the lender that accurately reflects each person's share, though not all lenders will accommodate this. Based on our experience assessment, the first option is more commonly used and accepted by the IRS when supported by impeccable documentation.

What Are Common Tax Filing Mistakes for Co-Owners?

Even with the best intentions, co-owners often make avoidable errors. A frequent mistake is assuming deductions must match the ownership percentage on the deed, which is not the IRS's primary concern. Other pitfalls include poor communication about who will claim which deductions and inadequate record-keeping for non-borrowing co-owners who help with payments. To avoid conflicts, draft a co-ownership agreement that explicitly outlines how mortgage interest and property tax deductions will be handled each year. This proactive step can prevent last-minute disputes and ensure both parties report consistently to the IRS.

Conclusion Successfully managing tax deductions for a co-owned property hinges on clarity and documentation. Base your deductions on your actual, documented payments for mortgage interest and property taxes. Create a written co-ownership agreement to preemptively settle how expenses and deductions will be split. Finally, consult with a qualified tax professional, especially when refinancing, changing ownership shares, or if your contribution patterns are complex. This practical approach helps keep the IRS satisfied and preserves the financial partnership.