diff --git a/changelog.d/nc-mortgage-property-cap-mfs.fixed.md b/changelog.d/nc-mortgage-property-cap-mfs.fixed.md
new file mode 100644
index 00000000000..7ac5d07fdfc
--- /dev/null
+++ b/changelog.d/nc-mortgage-property-cap-mfs.fixed.md
@@ -0,0 +1 @@
+North Carolina's $20,000 cap on mortgage interest and real estate taxes is now shared by spouses filing separately, including a spouse in another state, prorated by the share each paid or, for joint-account payments, by each spouse's income (G.S. 105-153.5(a)(2)b).
diff --git a/policyengine_us/tests/core/test_nc_mortgage_and_property_tax_limitation_invariants.py b/policyengine_us/tests/core/test_nc_mortgage_and_property_tax_limitation_invariants.py
new file mode 100644
index 00000000000..e8cffe9a9a4
--- /dev/null
+++ b/policyengine_us/tests/core/test_nc_mortgage_and_property_tax_limitation_invariants.py
@@ -0,0 +1,261 @@
+"""Invariants of North Carolina's $20,000 mortgage and property tax limitation.
+
+N.C. Gen. Stat. 105-153.5(a)(2)b caps home mortgage interest plus real estate
+taxes at $20,000, "claimed by both spouses combined" when spouses file
+separately. Above $20,000 the deductions are "prorated based on the percentage
+paid by each spouse", or, "for joint obligations paid from joint accounts",
+"based on the income reported by each spouse". Form D-400 Schedule A applies
+this as line 4 (the limitation) and line 5 (the smaller of line 3 and line 4).
+
+Generated situations use nonnegative line 3, valid tax-unit heads, explicit
+marital units, and NC households. They include separate couples with and
+without a joint account, joint returns, single filers, a lone separate filer,
+and a separate return with a dependent. YAML can represent mixed vectorized
+populations; Python adds randomized generation, shrinking, and dynamic
+comparisons after swapping spouse labels or raising payments. Hypothesis
+draws six batches of 5 to 25 records, choosing 2024 or 2026 for each; a seeded
+population of 120 records runs in both years. Line 3 and AGI are inputs, so
+these tests do not cover the federal line-3 calculation. Within this domain:
+
+1. Differential: lines 4 and 5 equal an independent restatement of the
+   statute, with the $20,000 taken from the statute rather than the
+   parameter files. In these fixtures, two separate heads in an explicit
+   two-person marital unit are spouses. The paid share is each spouse's line 3
+   over the couple's total;
+   the joint-account share is each spouse's federal AGI, not below zero, over
+   the couple's, or one half when neither spouse has any.
+2. Bounds: 0 <= line 5 <= line 3, and a couple's two lines 5 never exceed
+   $20,000. Without a joint account they add up to the smaller of the
+   couple's line 3 total and $20,000.
+3. Label invariance: listing a couple's spouses in the other order gives each
+   spouse the same result.
+4. Monotone (without a joint account): raising one spouse's payments never
+   lowers that spouse's deduction or the couple's total, and never raises the
+   other spouse's deduction. With a joint account the form can lower the
+   total: just above $20,000 each spouse gets the smaller of their own line 3
+   and their income share of $20,000. That is intended under the Schedule A
+   reading and not checked here.
+"""
+
+import numpy as np
+from hypothesis import HealthCheck, given, settings
+from hypothesis import strategies as st
+
+from policyengine_us import Simulation
+
+CAP = 20_000  # G.S. 105-153.5(a)(2)b
+TOLERANCE = 0.01  # dollars
+YEARS = ["2024", "2026"]
+
+amounts = st.one_of(
+    st.just(0.0),
+    st.integers(1, 12_000).map(float),
+    st.integers(12_000, 45_000).map(float),
+)
+incomes = st.one_of(
+    st.just(0.0),
+    st.integers(-30_000, -1).map(float),
+    st.integers(1, 300_000).map(float),
+)
+increases = st.integers(0, 20_000).map(float)
+KINDS = ["separate", "joint", "single", "lone_separate", "separate_dependent"]
+
+
+@st.composite
+def returns(draw):
+    kind = draw(st.sampled_from(KINDS))
+    spouses = 2 if kind in ("separate", "separate_dependent") else 1
+    return {
+        "kind": kind,
+        "line3": [draw(amounts) for _ in range(spouses)],
+        "agi": [draw(incomes) for _ in range(spouses)],
+        "increase": draw(increases),
+        "joint_account": draw(st.booleans()) and spouses == 2,
+    }
+
+
+def _seeded_returns(n=120, seed=20261009):
+    rng = np.random.default_rng(seed)
+    drawn = []
+    for _ in range(n):
+        kind = KINDS[rng.integers(len(KINDS))]
+        spouses = 2 if kind in ("separate", "separate_dependent") else 1
+        drawn.append(
+            {
+                "kind": kind,
+                "line3": [
+                    float(rng.choice([0, rng.integers(1, 45_001)]))
+                    for _ in range(spouses)
+                ],
+                "agi": [float(rng.integers(-30_000, 300_001)) for _ in range(spouses)],
+                "increase": float(rng.integers(0, 20_001)),
+                "joint_account": bool(rng.random() < 0.5) and spouses == 2,
+            }
+        )
+    return drawn
+
+
+def _situation(drawn, year, *, swap=False, raise_first=False):
+    """One tax unit per return, or two for spouses filing separately."""
+    people, tax_units, marital_units, households = {}, {}, {}, {}
+    rows = []  # (return index, spouse index) per tax unit, in order
+    for i, r in enumerate(drawn):
+        order = [1, 0] if swap and len(r["line3"]) == 2 else [0, 1]
+        line3 = list(r["line3"])
+        if raise_first:
+            line3[0] += r["increase"]
+        names = []
+        if r["kind"] == "joint":
+            names = [f"r{i}_head", f"r{i}_spouse"]
+            people[names[0]] = {"age": {year: 45}}
+            people[names[1]] = {"age": {year: 43}}
+            tax_units[f"t{i}"] = {
+                "members": names,
+                "filing_status": {year: "JOINT"},
+                "nc_mortgage_and_property_tax_before_limitation": {year: line3[0]},
+                "adjusted_gross_income": {year: r["agi"][0]},
+            }
+            marital_units[f"m{i}"] = {"members": names}
+            rows.append((i, 0))
+        elif r["kind"] in ("single", "lone_separate"):
+            names = [f"r{i}_head"]
+            people[names[0]] = {"age": {year: 45}}
+            tax_units[f"t{i}"] = {
+                "members": names,
+                "filing_status": {
+                    year: "SINGLE" if r["kind"] == "single" else "SEPARATE"
+                },
+                "nc_mortgage_and_property_tax_before_limitation": {year: line3[0]},
+                "adjusted_gross_income": {year: r["agi"][0]},
+            }
+            marital_units[f"m{i}"] = {"members": names}
+            rows.append((i, 0))
+        else:
+            couple = []
+            for k in order:
+                name = f"r{i}_spouse{k}"
+                couple.append(name)
+                members = [name]
+                people[name] = {"age": {year: 45}}
+                if r["kind"] == "separate_dependent" and k == 0:
+                    child = f"r{i}_child"
+                    people[child] = {
+                        "age": {year: 10},
+                        "is_tax_unit_dependent": {year: True},
+                    }
+                    members.append(child)
+                    marital_units[f"m{i}_child"] = {"members": [child]}
+                    names.append(child)
+                tax_units[f"t{i}_{k}"] = {
+                    "members": members,
+                    "filing_status": {year: "SEPARATE"},
+                    "nc_mortgage_and_property_tax_before_limitation": {year: line3[k]},
+                    "adjusted_gross_income": {year: r["agi"][k]},
+                }
+                rows.append((i, k))
+            marital_units[f"m{i}"] = {
+                "members": couple,
+                "mortgage_and_real_estate_taxes_paid_from_joint_account": {
+                    year: r["joint_account"]
+                },
+            }
+            names += couple
+        households[f"h{i}"] = {"members": names, "state_code": {year: "NC"}}
+    situation = {
+        "people": people,
+        "tax_units": tax_units,
+        "marital_units": marital_units,
+        "households": households,
+    }
+    return Simulation(situation=situation), rows
+
+
+def _expected(drawn, raise_first=False):
+    """Lines 4 and 5 per (return, spouse), restated from the statute."""
+    limitation, deduction = {}, {}
+    for i, r in enumerate(drawn):
+        line3 = list(r["line3"])
+        if raise_first:
+            line3[0] += r["increase"]
+        if len(line3) == 1:
+            limitation[i, 0] = CAP
+            deduction[i, 0] = min(line3[0], CAP)
+            continue
+        combined = sum(line3)
+        if combined <= CAP:
+            shares = None
+        elif r["joint_account"]:
+            income = [max(a, 0) for a in r["agi"]]
+            total = sum(income)
+            shares = [a / total for a in income] if total > 0 else [0.5, 0.5]
+        else:
+            shares = [a / combined for a in line3]
+        for k in range(2):
+            limitation[i, k] = CAP if shares is None else CAP * shares[k]
+            deduction[i, k] = min(line3[k], limitation[i, k])
+    return limitation, deduction
+
+
+def _results(drawn, year, **kwargs):
+    simulation, rows = _situation(drawn, year, **kwargs)
+    line4 = simulation.calculate("nc_mortgage_and_property_tax_limitation", year)
+    line5 = simulation.calculate("nc_mortgage_and_property_tax_deduction", year)
+    return (
+        {row: float(v) for row, v in zip(rows, line4)},
+        {row: float(v) for row, v in zip(rows, line5)},
+    )
+
+
+def _check(drawn, year):
+    line3 = {(i, k): a for i, r in enumerate(drawn) for k, a in enumerate(r["line3"])}
+    expected4, expected5 = _expected(drawn)
+    line4, line5 = _results(drawn, year)
+
+    # 1. Differential against the restated statute.
+    for row in expected4:
+        assert abs(line4[row] - expected4[row]) < TOLERANCE, (row, drawn[row[0]])
+        assert abs(line5[row] - expected5[row]) < TOLERANCE, (row, drawn[row[0]])
+
+    # 2. Bounds, and the couple's total.
+    for row, value in line5.items():
+        assert -TOLERANCE < value < line3[row] + TOLERANCE
+    for i, r in enumerate(drawn):
+        if len(r["line3"]) == 2:
+            total = line5[i, 0] + line5[i, 1]
+            assert total < CAP + TOLERANCE
+            if not r["joint_account"]:
+                assert abs(total - min(sum(r["line3"]), CAP)) < TOLERANCE
+
+    # 3. The order in which the spouses are listed does not matter.
+    swapped4, swapped5 = _results(drawn, year, swap=True)
+    for row in line5:
+        assert abs(swapped4[row] - line4[row]) < TOLERANCE
+        assert abs(swapped5[row] - line5[row]) < TOLERANCE
+
+    # 4. Paying more never lowers the payer's deduction or the couple's total
+    # without a joint account.
+    raised4, raised5 = _results(drawn, year, raise_first=True)
+    expected_raised4, expected_raised5 = _expected(drawn, raise_first=True)
+    for row in expected_raised5:
+        assert abs(raised4[row] - expected_raised4[row]) < TOLERANCE
+        assert abs(raised5[row] - expected_raised5[row]) < TOLERANCE
+    for i, r in enumerate(drawn):
+        if len(r["line3"]) == 2 and not r["joint_account"]:
+            assert raised5[i, 0] > line5[i, 0] - TOLERANCE
+            assert raised5[i, 1] < line5[i, 1] + TOLERANCE
+            assert raised5[i, 0] + raised5[i, 1] > line5[i, 0] + line5[i, 1] - TOLERANCE
+
+
+@settings(
+    max_examples=6,
+    deadline=None,
+    suppress_health_check=[HealthCheck.too_slow, HealthCheck.data_too_large],
+)
+@given(drawn=st.lists(returns(), min_size=5, max_size=25), year=st.sampled_from(YEARS))
+def test_nc_mortgage_and_property_tax_limitation_invariants(drawn, year):
+    _check(drawn, year)
+
+
+def test_nc_mortgage_and_property_tax_limitation_seeded_population():
+    for year in YEARS:
+        _check(_seeded_returns(), year)
diff --git a/policyengine_us/tests/policy/baseline/gov/states/nc/tax/income/deductions/nc_itemized_deductions.yaml b/policyengine_us/tests/policy/baseline/gov/states/nc/tax/income/deductions/nc_itemized_deductions.yaml
index eb8ccc0a96c..2ec2b5c8876 100644
--- a/policyengine_us/tests/policy/baseline/gov/states/nc/tax/income/deductions/nc_itemized_deductions.yaml
+++ b/policyengine_us/tests/policy/baseline/gov/states/nc/tax/income/deductions/nc_itemized_deductions.yaml
@@ -46,6 +46,43 @@
   output:
     nc_itemized_deductions: 14_000
 
+- name: Spouses filing separately share the $20,000 mortgage and property tax limitation
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+        employment_income: 90_000
+        home_mortgage_interest: 15_000
+      spouse2:
+        age: 45
+        employment_income: 90_000
+        home_mortgage_interest: 15_000
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: SEPARATE
+        charitable_deduction: 5_000
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+        charitable_deduction: 5_000
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    # G.S. 105-153.5(a)(2)b: $20,000 for both spouses combined, prorated by
+    # the 50% each paid, so $10,000 each, plus $5,000 of charity.
+    nc_itemized_deductions: [15_000, 15_000]
+    # $15,000 exceeds the $12,750 standard deduction for a separate return.
+    nc_taxable_income: [75_000, 75_000]
+    # 4.5% in 2024.
+    nc_income_tax: [3_375, 3_375]
+
 - name: North Carolina follows the federal exclusion for self-employed insurance premiums
   period: 2025
   input:
diff --git a/policyengine_us/tests/policy/baseline/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_before_limitation.yaml b/policyengine_us/tests/policy/baseline/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_before_limitation.yaml
new file mode 100644
index 00000000000..482f949d18b
--- /dev/null
+++ b/policyengine_us/tests/policy/baseline/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_before_limitation.yaml
@@ -0,0 +1,32 @@
+# Form D-400 Schedule A line 3: home mortgage interest (line 1) plus real
+# estate property taxes (line 2), G.S. 105-153.5(a)(2)b.
+
+- name: Mortgage interest plus real estate taxes within the federal cap
+  period: 2024
+  input:
+    filing_status: JOINT
+    mortgage_interest: 9_000
+    real_estate_taxes: 4_000
+    state_code: NC
+  output:
+    nc_mortgage_and_property_tax_before_limitation: 13_000
+
+- name: Real estate taxes above the federal cap count only up to the cap
+  period: 2024
+  input:
+    filing_status: SEPARATE
+    mortgage_interest: 9_000
+    real_estate_taxes: 11_000
+    state_code: NC
+  output:
+    # Section 164 allows $5,000 of these taxes on a separate return.
+    nc_mortgage_and_property_tax_before_limitation: 14_000
+
+- name: The amount before limitation is not capped at $20,000
+  period: 2024
+  input:
+    filing_status: SINGLE
+    mortgage_interest: 25_000
+    state_code: NC
+  output:
+    nc_mortgage_and_property_tax_before_limitation: 25_000
diff --git a/policyengine_us/tests/policy/baseline/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_deduction.yaml b/policyengine_us/tests/policy/baseline/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_deduction.yaml
new file mode 100644
index 00000000000..b22505ec460
--- /dev/null
+++ b/policyengine_us/tests/policy/baseline/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_deduction.yaml
@@ -0,0 +1,334 @@
+# Form D-400 Schedule A line 5: "Compare Line 3 with Line 4 and enter the
+# smaller amount." Line 3 is home mortgage interest plus real estate property
+# taxes; line 4 is the $20,000 limitation, shared by spouses filing separately
+# (G.S. 105-153.5(a)(2)b). Spouses filing separately are two tax units linked
+# by an explicit marital unit.
+
+- name: A single filer's deduction is capped at $20,000
+  period: 2024
+  input:
+    filing_status: SINGLE
+    nc_mortgage_and_property_tax_before_limitation: 25_000
+    state_code: NC
+  output:
+    nc_mortgage_and_property_tax_deduction: 20_000
+
+- name: Spouses filing separately who each paid $15,000 of mortgage interest deduct $10,000 each
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+        home_mortgage_interest: 15_000
+      spouse2:
+        age: 45
+        home_mortgage_interest: 15_000
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: SEPARATE
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    # $30,000 combined; each paid half of the $20,000 the spouses may claim.
+    nc_mortgage_and_property_tax_before_limitation: [15_000, 15_000]
+    nc_mortgage_and_property_tax_deduction: [10_000, 10_000]
+
+- name: Spouses filing separately with unequal payments deduct their prorated shares of $20,000
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+        home_mortgage_interest: 18_000
+      spouse2:
+        age: 45
+        home_mortgage_interest: 2_000
+        real_estate_taxes: 4_000
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: SEPARATE
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    # $18,000 and $6,000 paid, $24,000 combined: 75% and 25% of $20,000.
+    nc_mortgage_and_property_tax_before_limitation: [18_000, 6_000]
+    nc_mortgage_and_property_tax_deduction: [15_000, 5_000]
+
+- name: Spouses filing separately below $20,000 combined each deduct what they paid
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+        home_mortgage_interest: 8_000
+      spouse2:
+        age: 45
+        home_mortgage_interest: 7_000
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: SEPARATE
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    nc_mortgage_and_property_tax_deduction: [8_000, 7_000]
+
+- name: Joint obligations paid from a joint account are prorated by income
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+        home_mortgage_interest: 15_000
+      spouse2:
+        age: 45
+        home_mortgage_interest: 15_000
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+        mortgage_and_real_estate_taxes_paid_from_joint_account: true
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: SEPARATE
+        adjusted_gross_income: 120_000
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+        adjusted_gross_income: 40_000
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    # Line 4 is 75% and 25% of $20,000: $15,000 and $5,000. Line 5 is the
+    # smaller of line 3 ($15,000 each) and line 4.
+    nc_mortgage_and_property_tax_limitation: [15_000, 5_000]
+    nc_mortgage_and_property_tax_deduction: [15_000, 5_000]
+
+- name: A joint-account income share above a spouse's own amount leaves line 5 at line 3
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+        home_mortgage_interest: 15_000
+      spouse2:
+        age: 45
+        home_mortgage_interest: 15_000
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+        mortgage_and_real_estate_taxes_paid_from_joint_account: true
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: SEPARATE
+        adjusted_gross_income: 90_000
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+        adjusted_gross_income: 10_000
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    # Line 4 is 90% and 10% of $20,000: $18,000 and $2,000. Line 5 takes the
+    # smaller of each spouse's line 3 ($15,000) and line 4.
+    nc_mortgage_and_property_tax_limitation: [18_000, 2_000]
+    nc_mortgage_and_property_tax_deduction: [15_000, 2_000]
+
+- name: Spouses in NC and VA paying $15,000 and $15,000 from a joint account share the cap
+  period: 2024
+  input:
+    people:
+      nc_spouse:
+        age: 45
+        is_tax_unit_head: true
+        home_mortgage_interest: 15_000
+      va_spouse:
+        age: 45
+        is_tax_unit_head: true
+        home_mortgage_interest: 15_000
+    marital_units:
+      couple:
+        members: [nc_spouse, va_spouse]
+        mortgage_and_real_estate_taxes_paid_from_joint_account: true
+    tax_units:
+      nc_tax_unit:
+        members: [nc_spouse]
+        filing_status: SEPARATE
+        adjusted_gross_income: 50_000
+      va_tax_unit:
+        members: [va_spouse]
+        filing_status: SEPARATE
+        adjusted_gross_income: 50_000
+    households:
+      nc_household:
+        members: [nc_spouse]
+        state_code: NC
+      va_household:
+        members: [va_spouse]
+        state_code: VA
+  output:
+    # $15,000 + $15,000 = $30,000 exceeds $20,000. Equal incomes give
+    # $20,000 x $50,000 / $100,000 = $10,000; line 5 is
+    # min($15,000, $10,000) = $10,000 for the NC spouse.
+    # The VA spouse's line 3 counts in the allocation; NC lines 4 and 5
+    # remain zero for their own return.
+    nc_mortgage_and_property_tax_before_limitation: [15_000, 15_000]
+    nc_mortgage_and_property_tax_limitation: [10_000, 0]
+    nc_mortgage_and_property_tax_deduction: [10_000, 0]
+
+- name: Spouses in NC and VA paying $25,000 and $15,000 from a joint account share the cap
+  period: 2024
+  input:
+    people:
+      nc_spouse:
+        age: 45
+        is_tax_unit_head: true
+        home_mortgage_interest: 25_000
+      va_spouse:
+        age: 45
+        is_tax_unit_head: true
+        home_mortgage_interest: 15_000
+    marital_units:
+      couple:
+        members: [nc_spouse, va_spouse]
+        mortgage_and_real_estate_taxes_paid_from_joint_account: true
+    tax_units:
+      nc_tax_unit:
+        members: [nc_spouse]
+        filing_status: SEPARATE
+        adjusted_gross_income: 50_000
+      va_tax_unit:
+        members: [va_spouse]
+        filing_status: SEPARATE
+        adjusted_gross_income: 50_000
+    households:
+      nc_household:
+        members: [nc_spouse]
+        state_code: NC
+      va_household:
+        members: [va_spouse]
+        state_code: VA
+  output:
+    # $25,000 + $15,000 = $40,000 exceeds $20,000. Equal incomes give
+    # $20,000 x $50,000 / $100,000 = $10,000; line 5 is
+    # min($25,000, $10,000) = $10,000 for the NC spouse.
+    # The VA spouse's line 3 counts in the allocation; NC lines 4 and 5
+    # remain zero for their own return.
+    nc_mortgage_and_property_tax_before_limitation: [25_000, 15_000]
+    nc_mortgage_and_property_tax_limitation: [10_000, 0]
+    nc_mortgage_and_property_tax_deduction: [10_000, 0]
+
+- name: Spouses in NC and VA paying $15,000 and $15,000 from separate accounts share the cap
+  period: 2024
+  input:
+    people:
+      nc_spouse:
+        age: 45
+        is_tax_unit_head: true
+        home_mortgage_interest: 15_000
+      va_spouse:
+        age: 45
+        is_tax_unit_head: true
+        home_mortgage_interest: 15_000
+    marital_units:
+      couple:
+        members: [nc_spouse, va_spouse]
+        mortgage_and_real_estate_taxes_paid_from_joint_account: false
+    tax_units:
+      nc_tax_unit:
+        members: [nc_spouse]
+        filing_status: SEPARATE
+        adjusted_gross_income: 50_000
+      va_tax_unit:
+        members: [va_spouse]
+        filing_status: SEPARATE
+        adjusted_gross_income: 50_000
+    households:
+      nc_household:
+        members: [nc_spouse]
+        state_code: NC
+      va_household:
+        members: [va_spouse]
+        state_code: VA
+  output:
+    # $15,000 + $15,000 = $30,000 exceeds $20,000. The NC paid share is
+    # $15,000 / $30,000, so $20,000 x 15/30 = $10,000; line 5 is
+    # min($15,000, $10,000) = $10,000 for the NC spouse.
+    # The VA spouse's line 3 counts in the allocation; NC lines 4 and 5
+    # remain zero for their own return.
+    nc_mortgage_and_property_tax_before_limitation: [15_000, 15_000]
+    nc_mortgage_and_property_tax_limitation: [10_000, 0]
+    nc_mortgage_and_property_tax_deduction: [10_000, 0]
+
+- name: Spouses in NC and VA paying $25,000 and $15,000 from separate accounts share the cap
+  period: 2024
+  input:
+    people:
+      nc_spouse:
+        age: 45
+        is_tax_unit_head: true
+        home_mortgage_interest: 25_000
+      va_spouse:
+        age: 45
+        is_tax_unit_head: true
+        home_mortgage_interest: 15_000
+    marital_units:
+      couple:
+        members: [nc_spouse, va_spouse]
+        mortgage_and_real_estate_taxes_paid_from_joint_account: false
+    tax_units:
+      nc_tax_unit:
+        members: [nc_spouse]
+        filing_status: SEPARATE
+        adjusted_gross_income: 50_000
+      va_tax_unit:
+        members: [va_spouse]
+        filing_status: SEPARATE
+        adjusted_gross_income: 50_000
+    households:
+      nc_household:
+        members: [nc_spouse]
+        state_code: NC
+      va_household:
+        members: [va_spouse]
+        state_code: VA
+  output:
+    # $25,000 + $15,000 = $40,000 exceeds $20,000. The NC paid share is
+    # $25,000 / $40,000, so $20,000 x 25/40 = $12,500; line 5 is
+    # min($25,000, $12,500) = $12,500 for the NC spouse.
+    # The VA spouse's line 3 counts in the allocation; NC lines 4 and 5
+    # remain zero for their own return.
+    nc_mortgage_and_property_tax_before_limitation: [25_000, 15_000]
+    nc_mortgage_and_property_tax_limitation: [12_500, 0]
+    nc_mortgage_and_property_tax_deduction: [12_500, 0]
diff --git a/policyengine_us/tests/policy/baseline/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_limitation.yaml b/policyengine_us/tests/policy/baseline/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_limitation.yaml
new file mode 100644
index 00000000000..6d98d0761c4
--- /dev/null
+++ b/policyengine_us/tests/policy/baseline/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_limitation.yaml
@@ -0,0 +1,524 @@
+# N.C. Gen. Stat. 105-153.5(a)(2)b and the D-401 instructions for Form D-400
+# Schedule A line 4: "For spouses filing as married filing separately or
+# married filing jointly, the total mortgage interest and real estate taxes
+# claimed by both spouses combined may not exceed $20,000." Above $20,000 the
+# spouses' amounts "must be prorated based on the percentage paid by each
+# spouse", and "for joint obligations paid from joint accounts, the proration
+# is based on the income reported by each spouse".
+# Spouses filing separately are two tax units linked by an explicit marital
+# unit. Unless a case says otherwise, the amounts before limitation (line 3)
+# are inputs.
+
+- name: A single filer's limitation is $20,000
+  period: 2024
+  input:
+    filing_status: SINGLE
+    nc_mortgage_and_property_tax_before_limitation: 25_000
+    state_code: NC
+  output:
+    nc_mortgage_and_property_tax_limitation: 20_000
+
+- name: A joint return has one $20,000 limitation for both spouses
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+      spouse2:
+        age: 45
+    tax_units:
+      tax_unit:
+        members: [spouse1, spouse2]
+        filing_status: JOINT
+        nc_mortgage_and_property_tax_before_limitation: 30_000
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    nc_mortgage_and_property_tax_limitation: 20_000
+
+- name: Spouses filing separately who each paid $15,000 share the limitation equally
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+      spouse2:
+        age: 45
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    # $30,000 combined exceeds $20,000: each paid 50%, so $20,000 x 50%.
+    nc_mortgage_and_property_tax_limitation: [10_000, 10_000]
+
+- name: Spouses filing separately with unequal payments prorate the limitation by the share each paid
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+      spouse2:
+        age: 45
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 18_000
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 6_000
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    # $24,000 combined: $20,000 x 18/24 = $15,000 and $20,000 x 6/24 = $5,000.
+    nc_mortgage_and_property_tax_limitation: [15_000, 5_000]
+
+- name: Spouses filing separately keep the full limitation when their combined amounts are below $20,000
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+      spouse2:
+        age: 45
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 8_000
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 7_000
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    # $15,000 combined does not exceed $20,000, so nothing is prorated.
+    nc_mortgage_and_property_tax_limitation: [20_000, 20_000]
+
+- name: Spouses filing separately whose combined amounts equal $20,000 are not prorated
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+      spouse2:
+        age: 45
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 12_000
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 8_000
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    # Proration applies only when the combined amount "exceeds" $20,000.
+    nc_mortgage_and_property_tax_limitation: [20_000, 20_000]
+
+- name: Joint obligations paid from a joint account prorate the limitation by each spouse's income
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+      spouse2:
+        age: 45
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+        mortgage_and_real_estate_taxes_paid_from_joint_account: true
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+        adjusted_gross_income: 120_000
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+        adjusted_gross_income: 40_000
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    # Income shares 120/160 = 75% and 40/160 = 25% of $20,000.
+    nc_mortgage_and_property_tax_limitation: [15_000, 5_000]
+
+- name: Joint-account proration gives no share to a spouse with negative income
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+      spouse2:
+        age: 45
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+        mortgage_and_real_estate_taxes_paid_from_joint_account: true
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+        adjusted_gross_income: -10_000
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+        adjusted_gross_income: 60_000
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    # Income below zero counts as zero: shares 0/60,000 and 60,000/60,000.
+    nc_mortgage_and_property_tax_limitation: [0, 20_000]
+
+- name: Joint-account proration is equal when neither spouse has income
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+      spouse2:
+        age: 45
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+        mortgage_and_real_estate_taxes_paid_from_joint_account: true
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 18_000
+        adjusted_gross_income: 0
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 6_000
+        adjusted_gross_income: 0
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    nc_mortgage_and_property_tax_limitation: [10_000, 10_000]
+
+- name: A joint account changes nothing when the combined amounts are below $20,000
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+      spouse2:
+        age: 45
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+        mortgage_and_real_estate_taxes_paid_from_joint_account: true
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 8_000
+        adjusted_gross_income: 150_000
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 7_000
+        adjusted_gross_income: 10_000
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    nc_mortgage_and_property_tax_limitation: [20_000, 20_000]
+
+- name: The proration uses each spouse's allowed property taxes, not taxes above the federal cap
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+        home_mortgage_interest: 10_000
+        # Only $5,000 is allowed under section 164 on a separate return.
+        real_estate_taxes: 9_000
+      spouse2:
+        age: 45
+        home_mortgage_interest: 10_000
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: SEPARATE
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    # Line 3 is $10,000 + $5,000 = $15,000 and $10,000; $25,000 combined.
+    # $20,000 x 15/25 = $12,000 and $20,000 x 10/25 = $8,000.
+    nc_mortgage_and_property_tax_before_limitation: [15_000, 10_000]
+    nc_mortgage_and_property_tax_limitation: [12_000, 8_000]
+
+- name: A spouse with a dependent on their separate return still shares the limitation
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+      spouse2:
+        age: 43
+      child:
+        age: 10
+        is_tax_unit_dependent: true
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+      child_unit:
+        members: [child]
+    tax_units:
+      tax_unit1:
+        members: [spouse1, child]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+    households:
+      household:
+        members: [spouse1, spouse2, child]
+        state_code: NC
+  output:
+    nc_mortgage_and_property_tax_limitation: [10_000, 10_000]
+
+- name: A separate filer whose spouse is not in the simulation keeps the $20,000 limitation
+  period: 2024
+  input:
+    filing_status: SEPARATE
+    nc_mortgage_and_property_tax_before_limitation: 25_000
+    state_code: NC
+  output:
+    # The spouse's amount is unknown, so none is counted against the cap.
+    nc_mortgage_and_property_tax_limitation: 20_000
+
+- name: Two separate filers alone in a simulation without marital units are read as spouses
+  period: 2024
+  input:
+    people:
+      person1:
+        age: 45
+      person2:
+        age: 45
+    tax_units:
+      tax_unit1:
+        members: [person1]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+      tax_unit2:
+        members: [person2]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+    households:
+      household:
+        members: [person1, person2]
+        state_code: NC
+  output:
+    # Both separate heads share a default two-person marital unit,
+    # which the model uses to identify the two as spouses.
+    nc_mortgage_and_property_tax_limitation: [10_000, 10_000]
+
+- name: A separate filer does not share the limitation with an unrelated single filer
+  period: 2024
+  input:
+    people:
+      person1:
+        age: 45
+      person2:
+        age: 45
+    tax_units:
+      tax_unit1:
+        members: [person1]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+      tax_unit2:
+        members: [person2]
+        filing_status: SINGLE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+    households:
+      household1:
+        members: [person1]
+        state_code: NC
+      household2:
+        members: [person2]
+        state_code: NC
+  output:
+    nc_mortgage_and_property_tax_limitation: [20_000, 20_000]
+
+- name: Separate filers in a default marital unit of three people do not share the limitation
+  period: 2024
+  input:
+    people:
+      person1:
+        age: 45
+      person2:
+        age: 45
+      person3:
+        age: 45
+    tax_units:
+      tax_unit1:
+        members: [person1]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+      tax_unit2:
+        members: [person2]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+      tax_unit3:
+        members: [person3]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+    households:
+      household:
+        members: [person1, person2, person3]
+        state_code: NC
+  output:
+    # A default unit of three cannot identify a spouse.
+    nc_mortgage_and_property_tax_limitation: [20_000, 20_000, 20_000]
+
+- name: Spouses filing separately share the limitation in 2026
+  period: 2026
+  input:
+    people:
+      spouse1:
+        age: 45
+      spouse2:
+        age: 45
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 30_000
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 10_000
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    # $40,000 combined: $20,000 x 30/40 and $20,000 x 10/40.
+    nc_mortgage_and_property_tax_limitation: [15_000, 5_000]
+
+- name: A considered-unmarried head-of-household spouse does not share the cap with a separate filer
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+        is_tax_unit_head: true
+      spouse2:
+        age: 45
+        is_tax_unit_head: true
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: HEAD_OF_HOUSEHOLD
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    # The considered-unmarried HOH filer is outside the spouses' shared
+    # cap: each has $20,000, and min($15,000, $20,000) is $15,000.
+    nc_mortgage_and_property_tax_limitation: [20_000, 20_000]
+    nc_mortgage_and_property_tax_deduction: [15_000, 15_000]
+
+- name: Separate returns with no tax-unit heads fall back to the per-return cap
+  period: 2024
+  input:
+    people:
+      spouse1:
+        age: 45
+        is_tax_unit_head: false
+      spouse2:
+        age: 45
+        is_tax_unit_head: false
+    marital_units:
+      couple:
+        members: [spouse1, spouse2]
+    tax_units:
+      tax_unit1:
+        members: [spouse1]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+      tax_unit2:
+        members: [spouse2]
+        filing_status: SEPARATE
+        nc_mortgage_and_property_tax_before_limitation: 15_000
+    households:
+      household:
+        members: [spouse1, spouse2]
+        state_code: NC
+  output:
+    # Without two separate heads the spouse guard is false: each return
+    # keeps $20,000, and min($15,000, $20,000) is $15,000. These invalid filer
+    # roles are outside the property tests' valid-head shared-cap domain.
+    nc_mortgage_and_property_tax_limitation: [20_000, 20_000]
+    nc_mortgage_and_property_tax_deduction: [15_000, 15_000]
diff --git a/policyengine_us/variables/gov/states/nc/tax/income/deductions/nc_itemized_deductions.py b/policyengine_us/variables/gov/states/nc/tax/income/deductions/nc_itemized_deductions.py
index 037c46fd128..84d7b84b197 100644
--- a/policyengine_us/variables/gov/states/nc/tax/income/deductions/nc_itemized_deductions.py
+++ b/policyengine_us/variables/gov/states/nc/tax/income/deductions/nc_itemized_deductions.py
@@ -11,18 +11,10 @@ class nc_itemized_deductions(Variable):
     defined_for = StateCode.NC
 
     def formula(tax_unit, period, parameters):
-        # Qualified Mortgage Interest and Real Estate Property Taxes.
-        filing_status = tax_unit("filing_status", period)
-
-        mortgage_interest = add(tax_unit, period, ["mortgage_interest"])
-        pirs = parameters(period).gov.irs.deductions.itemized.salt_and_real_estate
-        property_taxes = min_(
-            add(tax_unit, period, ["real_estate_taxes"]),
-            pirs.cap[filing_status],
-        )
-        pco = parameters(period).gov.states.nc.tax.income.deductions.itemized.cap
-        capped_mortage_and_property_taxes = min_(
-            mortgage_interest + property_taxes, pco.mortgage_and_property_tax
+        # Qualified Mortgage Interest and Real Estate Property Taxes, after the
+        # $20,000 limitation shared by spouses (Schedule A line 5).
+        capped_mortage_and_property_taxes = tax_unit(
+            "nc_mortgage_and_property_tax_deduction", period
         )
 
         # North Carolina specifies a state and local tax deduction cap which is currently not modeled in PolicyEngine
diff --git a/policyengine_us/variables/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_before_limitation.py b/policyengine_us/variables/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_before_limitation.py
new file mode 100644
index 00000000000..24da4bdf9a9
--- /dev/null
+++ b/policyengine_us/variables/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_before_limitation.py
@@ -0,0 +1,29 @@
+from policyengine_us.model_api import *
+
+
+class nc_mortgage_and_property_tax_before_limitation(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "North Carolina mortgage interest and real estate property taxes before limitation"
+    unit = USD
+    definition_period = YEAR
+    documentation = "Form D-400 Schedule A line 3: home mortgage interest (line 1) plus real estate property taxes (line 2), before the $20,000 limitation. Calculated for all states so a separately filing spouse outside North Carolina contributes to the shared cap."
+    reference = (
+        # N.C. Gen. Stat. 105-153.5(a)(2)b
+        "https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_105/GS_105-153.5.html",
+        # 2025 Form D-401 instructions, Form D-400 Schedule A lines 1 to 3
+        "https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open#page=20",
+    )
+    # Both spouses' amounts enter the shared cap even if one lives outside NC.
+    # Only the final limitation and deduction are restricted to NC returns.
+
+    def formula(tax_unit, period, parameters):
+        filing_status = tax_unit("filing_status", period)
+
+        mortgage_interest = add(tax_unit, period, ["mortgage_interest"])
+        pirs = parameters(period).gov.irs.deductions.itemized.salt_and_real_estate
+        property_taxes = min_(
+            add(tax_unit, period, ["real_estate_taxes"]),
+            pirs.cap[filing_status],
+        )
+        return mortgage_interest + property_taxes
diff --git a/policyengine_us/variables/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_deduction.py b/policyengine_us/variables/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_deduction.py
new file mode 100644
index 00000000000..424b6c0d3d7
--- /dev/null
+++ b/policyengine_us/variables/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_deduction.py
@@ -0,0 +1,24 @@
+from policyengine_us.model_api import *
+
+
+class nc_mortgage_and_property_tax_deduction(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "North Carolina mortgage interest and real estate property tax deduction"
+    unit = USD
+    definition_period = YEAR
+    documentation = "Form D-400 Schedule A line 5: the smaller of the amount before limitation (line 3) and the limitation (line 4)."
+    reference = (
+        # N.C. Gen. Stat. 105-153.5(a)(2)b
+        "https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_105/GS_105-153.5.html",
+        # 2025 Form D-401 instructions, Form D-400 Schedule A line 5
+        "https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open#page=20",
+    )
+    defined_for = StateCode.NC
+
+    def formula(tax_unit, period, parameters):
+        before_limitation = tax_unit(
+            "nc_mortgage_and_property_tax_before_limitation", period
+        )
+        limitation = tax_unit("nc_mortgage_and_property_tax_limitation", period)
+        return min_(before_limitation, limitation)
diff --git a/policyengine_us/variables/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_limitation.py b/policyengine_us/variables/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_limitation.py
new file mode 100644
index 00000000000..f13d4610775
--- /dev/null
+++ b/policyengine_us/variables/gov/states/nc/tax/income/deductions/nc_mortgage_and_property_tax_limitation.py
@@ -0,0 +1,79 @@
+from policyengine_us.model_api import *
+
+
+class nc_mortgage_and_property_tax_limitation(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "North Carolina mortgage interest and real estate property tax limitation"
+    unit = USD
+    definition_period = YEAR
+    documentation = "Form D-400 Schedule A line 4: $20,000 per return, shared by spouses filing separate returns. When the spouses' combined amounts before limitation exceed $20,000, each spouse's limitation is their prorated share of $20,000."
+    reference = (
+        # N.C. Gen. Stat. 105-153.5(a)(2)b
+        "https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_105/GS_105-153.5.html",
+        # 2025 Form D-401 instructions, Form D-400 Schedule A line 4
+        "https://www.ncdor.gov/2025-d-401-individual-income-tax-instructions/open#page=20",
+    )
+    defined_for = StateCode.NC
+
+    def formula(tax_unit, period, parameters):
+        cap = parameters(
+            period
+        ).gov.states.nc.tax.income.deductions.itemized.cap.mortgage_and_property_tax
+        person = tax_unit.members
+        # "For spouses filing as married filing separately or married filing
+        # jointly, the total mortgage interest and real estate taxes claimed by
+        # both spouses combined may not exceed $20,000." A joint return holds
+        # both spouses, so the cap applies to it once. A spouse filing
+        # separately is in another tax unit. Reach them through the marital
+        # unit only when it holds exactly two people who each head a separate
+        # return: without explicit marital units, everyone shares one default
+        # unit.
+        filing_status = tax_unit("filing_status", period)
+        separate = filing_status == filing_status.possible_values.SEPARATE
+        head = person("is_tax_unit_head", period)
+        separate_head = head & tax_unit.project(separate)
+        couple = (person.marital_unit.nb_persons() == 2) & (
+            person.marital_unit.sum(separate_head) == 2
+        )
+        # Each spouse's amount before limitation (Schedule A line 3), on the
+        # head of their own return. Line 3 also computes federal amounts for
+        # an other-state spouse, whose payments count toward the shared cap.
+        before_limitation = tax_unit(
+            "nc_mortgage_and_property_tax_before_limitation", period
+        )
+        own = head * tax_unit.project(before_limitation)
+        combined = person.marital_unit.sum(own)
+        # "If the amount of the mortgage interest and real estate taxes paid by
+        # both spouses exceeds $20,000, these deductions must be prorated based
+        # on the percentage paid by each spouse."
+        paid_share = np.divide(
+            own, combined, out=np.zeros_like(own), where=combined > 0
+        )
+        # "For joint obligations paid from joint accounts, the proration is
+        # based on the income reported by each spouse for that taxable year."
+        # Income is federal adjusted gross income (Form D-400 line 6), not
+        # below zero; the shares are equal when neither spouse has any.
+        agi = max_(tax_unit("adjusted_gross_income", period), 0)
+        own_income = head * tax_unit.project(agi)
+        combined_income = person.marital_unit.sum(own_income)
+        income_share = where(
+            combined_income > 0,
+            np.divide(
+                own_income,
+                combined_income,
+                out=np.zeros_like(own_income),
+                where=combined_income > 0,
+            ),
+            0.5,
+        )
+        joint_account = person.marital_unit(
+            "mortgage_and_real_estate_taxes_paid_from_joint_account", period
+        )
+        share = where(joint_account, income_share, paid_share)
+        prorated = head & couple & (combined > cap)
+        return where(
+            tax_unit.any(prorated),
+            cap * tax_unit.sum(where(prorated, share, 0)),
+            cap,
+        )
diff --git a/policyengine_us/variables/household/expense/housing/mortgage_and_real_estate_taxes_paid_from_joint_account.py b/policyengine_us/variables/household/expense/housing/mortgage_and_real_estate_taxes_paid_from_joint_account.py
new file mode 100644
index 00000000000..9699b5ca1ad
--- /dev/null
+++ b/policyengine_us/variables/household/expense/housing/mortgage_and_real_estate_taxes_paid_from_joint_account.py
@@ -0,0 +1,11 @@
+from policyengine_us.model_api import *
+
+
+class mortgage_and_real_estate_taxes_paid_from_joint_account(Variable):
+    value_type = bool
+    entity = MaritalUnit
+    label = "Mortgage interest and real estate taxes paid from a joint account"
+    documentation = "Whether a married couple paid the home mortgage interest and real estate taxes they owe jointly from a joint account. North Carolina then shares its mortgage and property tax cap between spouses filing separately by income rather than by the amount each paid."
+    definition_period = YEAR
+    default_value = False
+    reference = "https://www.ncleg.gov/EnactedLegislation/Statutes/HTML/BySection/Chapter_105/GS_105-153.5.html"