The Form 1098 reports the outstanding mortgage principal as of January 1 of the current tax year in box 2 according to the IRS instructions for Form 1098. After you have entered all of your Form 1098s, if it appears that your mortgage interest should be limited, there will be a follow-up question asking for the ending balance of the mortgage so that the average mortgage balance can be calculated. This is not the same value that is included on your Form 1098. You will need to find it on your mortgage statement for the end of the 2024 year or the very beginning of 2025.
This calculation to limit your mortgage interest is done on the Deductible Home Mortgage Interest Worksheet, which you can print as part of your return or see in Forms if you are using a desktop version of TurboTax. You can see on this worksheet that the average balance is used for the calculation.
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