Question

Can I claim mortgage interest deduction on a state before I purchased the home?

Forum|Forum|1 year ago
August 18, 2024
1 reply
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During 2023 I lived in California for part of the year (rental) and then moved to NC where I purchased a home with a mortgage.

When filing my CA tax return in TurboTax, I see it is auto filling some amount of Mortgage interest deduction for California even though I never paid any part of the mortgage during the time I lived in CA (I was renting that entire time).

Is this correct? Or should I be changing the CA deduction amount to 0?

O

Opus 17

Employee

On a California part-year resident return, you allocate all income and deductions that are atrributable to California-sourced income, and all world-wide income and deductions for the days you were a California resident. So Turbotax is correct, if you paid 1-2 months of mortgage interest on a out of state property while you were still a California resident, that allocable interest is deductible on your California part-year return.

https://www.ftb.ca.gov/forms/misc/1100.html

M

mxrider108Author

Thanks for the reply. If I'm understanding correctly, however, it sounds like the interest would not be deductible based on your description?

Because I only started the mortgage for the new home after I moved out of California (no longer a resident). There was no overlap or time where I was paying for the home in NC while living in CA.

In that case I wouldn't deduct anything from the CA return, correct?

O

Opus 17

Employee

@mxrider108 wrote:

Thanks for the reply. If I'm understanding correctly, however, it sounds like the interest would not be deductible based on your description?

Because I only started the mortgage for the new home after I moved out of California (no longer a resident). There was no overlap or time where I was paying for the home in NC while living in CA.

In that case I wouldn't deduct anything from the CA return, correct?

I don't know the exact dates here. I thought maybe you bought the house and started paying interest before you moved.

As an example, if you left California on June 30, 2023; purchased your house July 15, 2023, and your first mortgage payment with interest was September 1, 2023, then none of the interest is allocable to California. On the other hand, suppose you purchased your new house on June 15, and left California on June 30, and your first full mortgage payment was August 1. In that case, the daily interest that you were charged as closing (to cover June 15-June 30) is allocable to California, even if it is not included in your 1098 from the bank, but the subsequent interest is not allocable to California.

There should be a way in Turbotax to manually assign items of income and deductions to one state or the other. If you can't find it, you can call customer support to have them walk through the program with you.