Many married couples observe fairly loose standards of ownership for each spouse's individual possessions. Whether for practical purposes or due to changing economic conditions, it's common for one spouse to make payments on obligations that technically exist in the other spouse's name. This is most common with big-ticket credit facilities and auto loans and mortgages. For instance, a husband may agree to pay his wife's car note as well as his own in exchange for monthly mortgage payments on their shared home loan. As long as their creditors receive timely payments, little harm can come of this "mixing and matching" arrangement.
The concept of ownership becomes more complicated when taxes are factored into the equation. Since there are many tax benefits to doing so, most married couples with two working partners file their taxes together. This arrangement is known in IRS parlance as "Married Filing Jointly."
Under current federal law, consumers receive excellent financial incentives to purchase new or existing homes using mortgage financing. In fact, one of the most attractive deductions and credits in the entire U.S. tax code is the mortgage interest deduction. This deduction permits qualifying homeowners to deduct part of the cost of their mortgages or home equity loans. While this benefit applies to married homeowners as well as single filers, it produces benefits for both spouses when it's applied to a joint tax filing.
The rules that govern claims on mortgage interest are relatively loose. If two spouses file their taxes jointly, the partner who made the mortgage payments may claim the full amount of the interest deduction. This is true regardless of the name on the title to the house or the identity of the official mortgage-holder.
If both spouses made payments on the mortgage over the course of the tax year, each one must calculate the exact amount that they are permitted by law to deduct. These deductions must add up to 100 percent of the interest that accrued to the mortgage during the year. In other words, both spouses can't simultaneously claim to have made full payments on their shared mortgage.
This arrangement only applies to married couples. A taxpayer can't claim a mortgage interest deduction for payments made to cover a mortgage carried by his or her child, parent, friend or extended relative. The individual who claims the deduction must have a secured interest in the house as well as a claim to its title.