I have two form 1098, one is for primary home, the other one is for partial rental property.
First 1098 is for the house bought (Nov, 2017), prior to Dec 15, 2017, it was my primary home since I bought it. I lived there till April 2023. May 2023, I have rented it out and moved to my new house.
Second 1098 is for my new house which was purchased in Aug 2022, we have been remodeling it, and moved into this house in May 2023 when it's ready.
The first 1098, 4 months was personal use, 8 months was rental property. So 67% rental, 33% personal use. Schedule E correctly split the mortgage interest accordingly.
The second 1098, was included in Schedule A itemized deduction. This is how TurboTax calculated the mortgage interest deduction for Schedule A:
First 1098, average debt balance is $300,000, total mortgage interest is $8,000. 67% rental = $5,360 is included in Schedule E. The rest 33% personal use = $2,640 is included in Schedule A.
Second 1098, average debt balance is $1,700,000, total mortgage interest is $60,000. In Deductible Home Mortgage Interest Worksheet, TurboTax did:
300,000+1,700,000=2,000,000, total average mortgage debt. (Part II qualified loan limit Line 10 in the worksheet)
8000+60000=68000, total mortgage interest
Qualified loan limit $750,000
750,000/2,000,000=.375
Total interest $68,000 * .375 = $25,500 which is the deductible mortgage interest (line 22 on the worksheet).
In Tax and Interest deduction Interest Worksheet:
Line 5a shows $25,500, Line 5b shows $2,640 (mortgage interest portion from Schedule E for personal use for first 1098).
So Total mortgage interest deduction = $25,500+$2,640 = $28,140, this is the amount shows in Schedule A line 8a for home mortgage interest deduction
Question: the personal use interest portion $2,640 was added to Schedule A, why in the qualified loan limit calculation combined the total of these two loans' average balance to arrive the limitation %? Isn't this is double counting?
