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Do I split deductions when filing separately?

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in Small Business Tax

Q: I read your recent article about filing separate tax returns. If my wife and I file separately, do we simply split our itemized deductions? G.S., Manchester, N.H.

A: As a general rule, no. Unless you live in one of the nine community-property states where income and expenses are split 50/50 for tax purposes, each spouse can deduct only expenses that he or she actually pays for. But if you actually pay expenses 50/50, you can split them 50/50 on your separate returns. For instance, if you're joint owners of your principal residence and you made mortgage payments out of a joint account that you both contributed to, each of you can claim a deduction for 50 percent. But if only one of you is the legal owner of the home, that person should claim the full interest deduction. Similarly, property taxes might be split, but each spouse claims his or her individual share of state income tax payments. Tip: As we explained, the most common case where filing separately makes sense is when one spouse has large medical bills that he or she paid for. (See 1/26/04 issue.)

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