Hello - I could use some help making sure I'm maximizing my mortgage deductions appropriately, and filling out the required tax forms to reflect a mortgage transfer and correct mortgage balance.
I sold my primary home and bought a new one this past year. My 1098T form from the sale of my primary house is correct - it shows a mortgage balance of approx. $992k at the beginning of the year, and it was paid off when the house was sold. I obtained a mortgage for my new home using first republic in July of this year. First republic was absorbed by Chase Bank later that year, and I only received a 1098T through Chase - I checked with FR and one wasn't available. While the original loan through FR was $750k, the 1098T form through chase shows an outstanding mortgage principal (box 2) of $748k, not $750k, though the mortgage origination date is correct.
Though slight, this discrepancy creates an issue with the average balance of the mortgages over the course of the year, which ultimately affects the deductible amount of interest I show on my tax filing I’ve gone into CA form 540 to manually adjust these numbers to reflect a beginning mortgage principal of $750k, and an ending balance of $748k for my second mortgage. I calculate an average mortgage balance of $1,245,306 vs. a prior average balance of $1,244,578, which means that I can deduct less of my mortgage interest than the original calculation. This calculation flows into my federal tax forms as well. Can you confirm I’m thinking about this properly?
Secondly, assuming the above is correct, I could use some help ensuring I’m calculating my allowable california interest amount on form 540. I’ve selected “yes” on the boxes saying interest is limited on the federal return, and yes that it needs to be adjusted. I use a 1.1M limit to calculate my interest, and put it in the “Total interest above reported on Form 1098”. Can you confirm this is correct?
