TIR 86-5: Rental Deduction (Married Couples) Filing Jointly and Separately
On December 18, 1985, Chapter 593 of the Acts of 1985, "An Act to Provide Tax Relief", was enacted. Section 5 of Chapter 593 amends paragraph (a)(9) of section 62 of the General Laws.
Before the enactment of Chapter 593, section 3B(a)(9) of the General Laws provided that an individual who pays rent for his/her principal residence is entitled to a deduction equal to fifty (50) percent of the rent paid, not to exceed $2,500, if such residence is located in Massachusetts. For tax years beginning January 1, 1986, Chapter 593 amended the section by adding the limitation that the deduction may not exceed $2,500 for a husband and wife. Therefore, with respect to a married couple, the combined deduction for rent paid for their principal residence(s) may not exceed $2,500, regardless of their living arrangement and filing status.
Where a husband and wife file a joint return, they are entitled to a rent deduction equal to 50% of the rent paid, not exceed $2,500.
Where a husband and wife file separate return, they are each entitled to a rent deduction equal 50% of the rent each pays, not to exceed $1,250 per return. However, a married couple filing separately may allocate the rent deduction differently, provided the amount taken by each spouse does not exceed 50% of the rent actually paid by the spouse, and provided their combined rent deductions do not exceed $2,500. If the allocation results in one spouse claiming a deduction in excess of $1,250, that spouse must attach to his/her return a statement signed by the other spouse indicating consent to the allocation. The statement must contain the name, address and social security number of the consenting spouse and the amount of rent deduction taken by that spouse. This statement is in addition to the requirement that each taxpayer claiming the rent deduction list on his/her return the address of each residence rented during the taxable year, the address rented and the amount of rent paid for each residence, as well as the name and address of each landlord.
The following examples illustrate how a husband and wife filing separate returns may allocate the rent deduction. In each example, it is assumed that the rental property is located in Massachusetts and is the principal residence of the spouse living in it.
EXAMPLE 1: H and W are married and filing separately. W owns her own home. H rents an apartment for $6,000 a year. W is not entitled to a rent deduction. H may take the maximum $2,500 rent deduction on his return.
EXAMPLE 2: H and W are married and filing separately. W rents an apartment for $7,500 for the taxable year. H rents an apartment for the last three months of the year, paying $1,000 in rent. H and W may allocate the $2,500 rent deduction between themselves with these limitations: their combined rent deductions cannot exceed $2,500 and H’s maximum deduction cannot exceed one half the rent he pays, or $500.
EXAMPLE 3: H and W are married and filing separately. H and W each rent an apartment and each pay rent equal to $6,000 a year. H and W may allocate the $2,500 rent deduction between themselves with this limitation: their combined rent deductions cannot exceed $2,500.
EXAMPLE 4: H and W are married and filing separately. They live together and together pay rent of $12,000 a year. H and W may allocate the $2,500 rent deduction between themselves with this limitation: their combined rent deductions cannot exceed $2,500.
In the situation where a husband and wife live separately and one spouse pays the rent of the other spouse, neither spouse is entitled to the rent deduction with respect to that rent. This may be illustrated by the following example:
EXAMPLE 5: H and W are married and filing separately. W owns her own home which is her principal residence. H rents an apartment as his principal residence. W pays H’s rent, $5,000 for the taxable year, by mailing a check directly to his landlord. Neither H nor W may take the rent deduction. In the case of W, this is because the rent W pays is not for her principal residence. In the case of H, this is because H does not pay the rent for his principal residence.
This TIR is prospective and supersedes letter ruling 85-29
Ira A. Jackson
Commissioner of Revenue
September 25, 1986