Paid Interest on 2 Loans in 2018 - 1 Loan before 12/15/2017 and 1 loan after 12/15/2017

Forum|Forum|7 years ago
March 31, 2019
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Hi, I paid interest on 2 loans in 2018. How to calculate the deductible interest. 1 Loan Originated on 12/07/2004 - $350000 (Sold the house and paid off in 11/2018) 2 Loan Originated on 7/31/2018 - $901000 Turbotax is not clear. How do I calculate the Average Balance. Is it combined balance?

N

NCPERSON1

the limit is $750.000 for mortgages post 12/31/17

page 11 for how to calculate

https://www.irs.gov/pub/irs-pdf/p936.pdf

each mortgage is calculated separately

looks like you are going to take a two point average of the new mortgage; note the average is the 1st day the mortgage is secured by the home - not January 1st

For the old mortgage, it's within the limits so all the interest is deductible

best to just follow the worksheet on page 11 and the accompanying instructions

S

SenthilAuthor

Employee

Hi, First Thank you for taking the time to review and sharing your knowledge. I initially had the same understanding as yours - deducting all interest for the old loan and reducing it only for the new loan. But the confusion started when I started using the 936-Page 11-worksheet. That worksheet covers all mortgages together and ends up adding my 2 loans than reducing my overall interest by 60% which does not seem correct - 350+901 = 1,251,000. 750/1251000*Total Interest

N

NCPERSON1

i got the same 60% calculation you did.

under the old law you were limited to $1,000,000 and since the two mortgages were outstanding at the same time (4 months), that would be limited as well.

there doesn't appear to be any consideration in the template or the examples for payoffs or acquisition in year