No, Turbo Tax may have handled this correctly, if your original house was acquired before 2017, because the mortgage limitation before 2017 was $1M. Here is what may have happened in your case.
The limitation is applied on an average balance between the two loans. If your original house had an outstanding loan balance of $900,000 and your new house had an outstanding balance of $900,000, the average balance is $900,000. for each residence.
If you took out a mortgage on your original home before 2017, the mortgage limitation was $1M. If the average balance is $900,000, then there is no mortgage limitation on that home because the threshold did not exceed the $1M limit.
Since the second loan balance did exceed $750,000, then there is a mortgage limitation applied to the second home. It sounds like this was correctly applied as you mentioned.
Now if the mortgage loan for your original house was originated after 2017 and if the loan balance exceeds $750,000, there may be a problem on how Turbo Tax handled this calculation.
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