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Calculating Average Mortgage balance for 2 loans

Forum|Forum|6 years ago
March 17, 2020
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Hi. I'm trying to figure out how to calculate an average mortgage balance when I bought and sold a house during 2019 in order to complete the adjusted mortgage interest worksheet. I read the IRS publication on it and it wasn't helpful, it just says generally the dates are first and last of the year when calculating the average but doesn't say when to not use those dates. Depending on how I do this calculation determines if I need to adjust the interest deduction or not. Using the balance at first and last of the year lowers my average balance but doing something for partial year raises it above the 750k threshold. Here is the key info from each loan/home:

Old home -

Originated 9/24/13

Balance on 1/1/19 - $255,365

Sold and closed on 4/5/19 with $249,703 sent as payoff in closing on that day.

Balance is 0 for rest of year

New home

Originated 2/20/29 with beginning balance $800,000

balance on 12/31/19 - $783,825

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Best answer by NCPERSON1

not saying your wrong, but there was no implications about making any monthly payments. Only thing that was mentioned in the question was a 'balance' of the (1 not 2) mortgage on the old home. There was a Balance of $255,356 in January to 'Payoff' the Homestead. Next stated was the payoff amount that he PAID to completely pay off the mortgage, not his monthly payments. If you're to assume that he is paying monthly payments, then you would simply have to subtract - the amount that he paid to PAYOFF the (1) mortgage . Now you have the total Assumed payment that was paid...not including the amount that was paid at close to payoff the (1) mortgage. Divide ÷ that number by 12 and now you have the average amount paid monthly. If payments were made monthly and still had a balance at the last date that he paid to close then must have only paid monthly payments totaling around $5'620. 🐐

@S7ngod - maybe you misunderstood - the numbers in my table of 12 months were BALANCES.... not payments... There is nothing in the original question nor my response that had to do with 'payments', It's all about balances. The information provided by @billab914 only stated what his balances were and I only responded with balance information. I didn't add the '000' ... also, that mortgage on the home that was sold, was outstanding for 3 months and has to be part of the average that way.

Can you please go back and read the original thread? one of us had really read it incorrectly,

Balances: (I estimated these but it shouldn't materially change the answer of $788,000 average balance)

Jan: $255,000

Feb: $253,000 + $800,000

March: $251,000 + $798,000

April : $796,000

May: $794,000

June: $792,000

July: $790,000

Aug: $788,000

Sept $787,000

Oct: $786,000

Nov.: $785,000

Dec: $784,000

assuming $788,000 is the average for the year, then only $750,000 / $788,000 or 95% of the interest is tax deductible.

S

S7ngod

Your average balance for 2019 is $252,564. To find the average balance you had between january 2019 to the payoff date, simply add the beginning balance to the payoff balance and then divide the result by 2 as there was just 2 numbers used in the initial addition equation.

N

NCPERSON1

use the monthly balance for the 12 months to strike a 12 point average . use the balances off the monthly servicer statements.

January would just use the old mortgage in the average

Feb- March would use both balances in the average

April - Dec would use the new mortgage only in the average

look at page 13 of IRS publication 936.... in the middle of the middle column it states:

Statements provided by your lender. If you receive monthly statements showing the closing
balance or the average balance for the month, you can use either to figure your average balance
for the year.

because you have those two overlapping months of Feb- March, your average for the year will be over $750,000

thoughts?

S

S7ngod

Keep in mind that the average amount in question is the average 'BALANCE' of said mortgage... Not the monthly payment of said mortgage. Also, its not possible to get a result that is greater than the highest number (Monthly balance) used to in initial calculation. Not possible. If the sum of the count is '0' then the average cannot be a number that is '>' than '0.0' ..,,🌵

N

NCPERSON1

@S7ngod - agreed it's the balances and not the payments...but zeros do not come into play here. and he could have a balance higher than the SUM of the two mortgages because they are overlapping by two months:

Jan: $255

Feb: $253 + $800

March: $251 + $798

April : $796

May: $794

June: $792

July: $790

Aug: $788

Sept $787

Oct: $786

Nov.: $785

Dec: $784

The average is going to be in and around $788,000 (take the sum of the 12 months and divide by 12)

J

JamesG1

Some TurboTax customers are experiencing an issue with their home mortgage average balance. This can cause the home mortgage interest to be incorrectly limited. This may be affecting your tax return.

Please sign up for email notifications when an update related to this issue is available.

See this TurboTax Help.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

J

jaystee

Can I calculate my average mortgage balance according to the IRS publication and use that as the mortgage balance in TurboTax? Seems to be a manual way to get the correct balance.

DaveF1006

Yes you would be able to use the Table 1. Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest for the Current Year. This is included in the following IRS link.

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B

baheil

is turbo tax ever going to add the "interest paid divided by interest rate" method so i have correct supporting documentation to prove i didn't have to limit my home mortgage interest? Right now i only see a worksheet that shows i need to limit my home mortgage interest.