Turbotax not capping Mortgage Interest on Schedule A- bug?

Forum|Forum|1 year ago
October 1, 2024
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I am renting out part of principal residence. I enter rental income data in Turbotax 2023 using Easy Steps. It collects rental income, expenses, property tax, and mortgage interest data as part of Rental income section. It is populating Schedule E correctly. It calculates property tax and mortgage interest portion for personal use itself for the purposes of Schedule A. It appears it is calculating those numbers wrong giving me more deductions than due. Here are the numbers:

Mortgage Interest 1098 reported: $60,000

Home Loan on Principal Residence: $1,500,000 (purchase date: Jan 1, 2020)

Rental portion of principal residence : 1/3

This data is collected by TurboTax in EasySteps as part of Rental Income. It then calculates the following correctly for Schedule E:

Mortgage Interest: 1/3* $60,000 = $20,000

However, in schedule A, it is listing $40,000 ($60,000 - $20,000) as the mortgage interest deduction. I believe the correct amount should be calculated as follows:

Mortgage Loan portion allocatable to personal portion: 2/3 * $1,500,000 = $1,000,000

Mortgage Loan limitation for loans acquired after 2017: $750,000

Mortgage Interest that can be claimed on Schedule A = 3/4 * $40,000 = $30,000

Two questions: is my understanding correct? Is turbotax wrong? Who is responsible if I file as is. If I override turbotax calculations, I cannot file electronically.

Best answer by Mike9241

I had checked with the lender. They still consider it owner occupied as I am living there and occupy majority of my principal residence.

I had checked with the lender. They still consider it owner occupied as I am living there and occupy majority of my principal residence. this is not relevant for income tax purposes.

workaround

on schedule E enter the $20K as mortgage interest - don't bother entering or linking the 1098 info

on the schedule for mortgage interest