If I own a 2 unit multifamily, where I live in one unit and rent the other unit, can I deduct 1/2 of my mortgage expense from form 1098 in rental

Yes. 

There are two ways to treat this in TurboTax.

- You can enter each unit that is actually rented as it's own physically separate property and claim 1/2 of the total costs for the entire unit, against that one unit.

- You can indicate in the program that you own a duplex where in live in one of the units as your primary residence, and let the program "do the splits" for you.

I suggest you select the first option and you (not the program) do any and all splits manually yourself. If you select to have the program "do the splits" for you, the program is incapable of splitting everything.

By entering the unit as it's own physically separate property, that gives you more flexibility in the future with significantly more ease.

Q.  Can I deduct 1/2 of my mortgage interest, from form 1098, in rental?

A. Simple answer: yes.  But maybe not exactly 50%, unless the two units are identical in size.  For example, if your home is 1000 square feet and the rental is only 800 s.f. , then only 44.44% (800 / 1800) of the interest would go on Schedule E as rental expense. The same would apply to real estate tax and any other shared expenses.