Turbo Tax is not mishandling the mortgage interest deduction. It is following the averaging guidelines in Pub 936 for two loans each secured by a different main home. For example, a main and second home. This would give you an average balance for both loans of $935,000 which limits your deductible balance to $750,000. $750,000/$935,000 = 80.2% of your interest is deductible. Is this fair? Nope. Does it make sense? Nope.
Publication 936 does not address the situation where your main home is sold and a new main home is bought in the same year. This leaves you only with the option to use the averaging method used for keeping your main home and buying a second home.
If I were you, I would enter all of your interest as deductible when given the opportunity with the following adjustment. Since you can only have one main home at a time, you should deduct the interest for May on mortgage A from the total interest.
