when i get multiple forms 1098, how do I determine the mortgage interest i can deduct?

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I had a HELOC, Took out a newer larger one to pay off the first and improve home. Got two separate 1098s. How do I handle the mortgage interst deduction?

TurboTax Online

DavidD66

Alumni - Intuit

The amount of interest you can deduct depends upon what you did with the proceeds from the first HELOC. If you used the firs HELOC to buy or improve the property secured by the loan, then you can can deduct all of the interest from that HELOC. You can also deduct all of the interest on the second HELOC, since it was used for improvements and to pay off the other HELOC that was used for improvements. If you didn't use 100% of the proceeds of the first HELOC for improvements then you have to allocate the interest based on the percentages used for improvements and other purposes.

For Example, if you used 50% of the proceeds from the first HELOC for home improvements, you can deduct 50% of that interest. If you used the proceeds from the second HELOC 50% to pay off the first HELOC and 50% new improvements, then you can deduct 75% of the interest for the that HELOC: 50% for the new improvements, and then 25% (1/2 of the 50%) for the portion that was used to payoff the first HELOC , that was used 50% for improvements.

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