IRS Increases 'Marriage Penalty,' Unmarried Cohabitants To Get Twice The Mortgage Interest Deduction

There are a thousand good reasons to never get married: in-laws, divorce attorneys, and the inevitable ravages of age on one’s attractiveness come immediately to mind.

But there are also significant tax hits that come with getting hitched, or as they’ve collectively been coined, the “marriage penalty.” For example, the 28% tax bracket kicks in at $91,150 of income if you’re single, but at only $151,900 — an amount basic math tells you is less than double $91,150 — for married taxpayers. In addition, single taxpayers start to lose 3% of itemized deductions when adjusted gross income exceeds $258,250; married taxpayers, however, will lose itemized deductions once adjusted gross income exceeds only $309,900.

Late last week, the IRS exacerbated the marriage penalty by offering a very large reward for unmarried taxpayers who co-own a home: double the mortgage interest deduction available to married taxpayer.

In AOD 2016-02, the IRS acquiesced in the Ninth Circuit’s decision in Sophy v. Commissioner, in which the appeals court overturned a Tax Court decision and allowed a same-sex, unmarried, co-habiting couple to each deduct the mortgage interest on $1.1 million of acquisition and home equity debt. In reaching its conclusion, the Ninth Circuit determined that the mortgage interest limitation is meant to apply on a per-taxpayer, rather than a per-residence, basis. The AOD issued by the IRS confirms that the Service will follow this treatment.

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-forbes.com