A federal appeals court has reversed a Tax Court decision in favor of an unmarried couple, finding the mortgage debt limit provision in the Tax Code applies on a per-taxpayer basis and allowing each of them to deduct mortgage interest up to the $1.1 million limit.

Bruce Voss and Charles Sophy, unmarried co-owners of real property in Beverly Hills and Rancho Mirage, Calif., each claimed a home mortgage interest deduction under Section 163(h)(3) of the Tax Code. The Code section allows taxpayers to deduct interest on up to $1 million of home acquisition debt and $100,000 of home equity debt. The IRS determined that Voss and Sophy were jointly subject to section 163(h)(3)’s debt limits, and thus disallowed a substantial portion of their claimed deductions.

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