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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29558
Experience:  Taxes, Immigration, Labor Relations
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My wife and I are pooling our incomes in order to qualify for

Customer Question

My wife and I are pooling our incomes in order to qualify for a mortgage on the house we want. But she is planning on retiring in about 2 or 3 years,assuming she does'nt get laid off before then and she will be in the lowest tax bracket, but i will remain in a much higher tax bracket for years to come based on my conservative projection of my investment and pension incomes. Can I, at a later date change the mortgage from joint to individual so that I can benefit from the full mortgage interest tax deduction after she retires. We plan on staying in our new home forever. We are going with a 25% down payment and a mortgage loan of $308,000 over a 15 year loan period, because we want to gain equity immediately and pay of the loan quicker. Thankyou, Ed and Sil.
Submitted: 4 years ago.
Category: Tax
Expert:  Lev replied 4 years ago.
Hi Ed and Sil and welcome to Just Answer!

There is no need to change the mortgage from joint to individual in order to deduct the mortgage interest. As long as you will pay that interest from your separate funds - you will be eligible to deduct your expenses.
However - because California is a community property state - expenses paid out of your community funds are divided equally.
If you want to remove your wife's name from the mortgage - you need to contact your lender. Most likely - you will need to refinance the mortgage.

I assume that you will file a joint tax return. It would be more beneficial to file jointly because your overall tax liability will be less compare if you choose to file separately.
Also if you file separate tax returns - you will not be able to claim some deductions and credits.
When a married couple files separate returns and one spouse itemizes deductions, the other spouse cannot claim the standard deduction and therefore must itemize to claim their allowable deductions.

Please let me know if you need help to estimate your possible tax liability.
Be sure to ask if you need any clarification.
Customer: replied 4 years ago.

I forgot to add to the original question that we are both "Married filing separately", not jointly. This is because my return is much more complicated because of rental income both here and in the UK and equities, etc That i need to see a CPA every year. My wife's is so simple, because she does'nt need to "itemize" and can fill her's out on turboTax in one evening. She figures that if she gets audited,she won't have to deal with my tax return, which is understandable.


Also I was informed by a previous CPA, that once I change from "Married filing separately" to "Married filing Jointly", I cannot revert back to"Married filing Separatley" again. Is this so? And what is your advise/answer now after reading the first paragraph?

Expert:  Lev replied 4 years ago.
That is correct - if you file as "Married filing Jointly" - you may amend your tax return and change to "Married filing separately" - but only before the due date of your return - in most situations - before Apr 15. After that date filing status may not be changed.

However - when a married couple files separate returns and one spouse itemizes deductions, the other spouse cannot claim the standard deduction and therefore must itemize to claim their allowable deductions.
That means - if you are using "Married filing separately" as your filing status and you itemize - your wife is required to itemize and may not use standard deduction.

In additional - you are living in California - which is a community property state - a spouse's wages, earnings, and net profits from a sole proprietorship are community income and must be evenly split on separately filed tax return.

Let me know if you need any help.