Mortgage interest deduction issues

Forum|Forum|5 years ago
February 27, 2021
2 replies
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I am having 2 issues regarding the mortgage interest deduction that I could use some clarification on.

1. We have a mortgage originated in 2016 for over $1,000,000. I understand that the mortgage interest is deductible up to the first $1,000,000 of debt. The TurboTax instructions say to follow the IRS 936 guidelines and enter the adjusted interest, which for us is around 70% of the actual interested we paid. However, when I do so, TurboTax ends up deducting ~70% of the already adjusted value. If I enter in the full amount of interest paid, TurboTax says our deductible interest is around 70% of the full amount, which is what I expect. Is TurboTax performing the adjustment automatically? Are the instructions simply incorrect/misleading?

2. I later encounter a screen for the CA mortgage interest adjustment. Since our loan originated in 2016 (prior to the 2017 transition to a $750,000 limit), we are still subject to the older $1,000,000 limit. As such, I didn't think we would qualify for the mortgage interest adjustment. However, TurboTax says that we are allowed a $3,000 adjustment. Is that correct?

Thanks for any help. Sorry for the long questions.

TurboTax Premier Online

Best answer by primus1981

1. I printed out the resulting forms and confirmed that TurboTax is automatically computing the correct limited deduction. The Schedule A and Deductible Home Mortgage Interest Worksheet have the expected values and calculations. I think the instructions were misleading.

2. Comparing the Schedule A Deductible Home Mortgage Interest Worksheet and the CA 540/540NR Deductible Home Mortgage Interest Worksheet, it appears that the $3,000 difference is due to an additional $100,000 allowed for home equity debt that raises the qualified loan limit to $1,100,000, compared to the federal limit of $1,000,000.

primus1981AuthorAnswer

zapzin

My interest for this past year on an existing balance of under $230,000 is $7396. This amount I entered, but does not show as a deduction on the final calculation where last year I was allowed the deduction of $8611.