Question

How to apply mortgage interest deduction limits for second home?

Forum|Forum|5 years ago
February 19, 2021
1 reply
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I entered two 1098s, one for primary home (acquired before Dec 2017), one for second home (bought after Dec 2017).

TurboTax seems to apply the deduction limits (1M & 750k) to each 1098 individually and concludes all interest (on a total balance > 1M) is deductible.

My understanding is one should apply a limit to the total balance outstanding on both homes. But somehow, because each property falls on difference sides of the Dec 2017 rules change, TurboTax seems to apply the limits separately, allowing me to deduct interest up to 1M+750k=1.75M. (if I change the dates on either mortgage the behavior in TurboTax changes and either the 1M or 750k limit is applied).

How to enter this correctly in TurboTax?

(I.e. using Table 1 of Part II of Pub 936)

TurboTax Premier Online

M

mglauner

Some TurboTax customers were experiencing an issue with their Home Mortgage Average Balance. This can cause the Home Mortgage Interest to be incorrectly limited.

Click this link for more info on Workaround for Limited Home Mortgage Interest.

P

pb5712Author

That workaround only describes how to handle multiple 1098s related to a refinance. Not other scenarios where interest deduction needs to be limited.

G

gloriah5200

box 7 and box 8 on the 1098 could make a difference as far as applying all the 1098 to the same property. The ones not for the principal residence would not have box 7 marked and would not apply toward the principal residence

Unless

The principal residence is the property that is securing the mortgage for both properties. Then you legitimately may not be entitled to deduct all mortgage interest against the same property.

Please verify what the box 7 and 8 for all 1098's is showing for the property secured by all mortgages...

If the principal residence is the property securing both properties then it probably should be limited.

Please refer to IRS Publication 936 for additional information.