Thank you for your help, however it did not work. I followed step by step like you instructed and still don't get the full interest deduction.
I paid a total of $20,276 in interest shown on 3 1098s and using the solution you provide me only allows for a $15,776 interest deduction on Schedule A.
The primary residence 1098 shows $11,405 interest paid, but this loan was refinanced in October 2020. The pay off on October 15 was $374,905. The second 1098 on this same property only has prepaid and one month's mortgage interest paid totaling $1,856 on the new loan of $387,208. Using the IRS mortgage balancing guide line as I interpret it the average mortgage balance for this property is $381,056. This is adding the two mortgages together and then dividing by 2 as per instructions in IRS Pub 936. It appears to me TT is adding these two mortgages together as though they were on a separate property pushing the mortgage balance above the $750,000 limitation. When I add these two mortgage balance together for the same property and add my second home mortgage, listed below, I gives me a total of $951,743.
Using the wks in IRS Pub 936 I determine the percentage of allowable interest to be 79%. ($750,000/$951,743=.789) which lines up with the TT figure so I know this is the reason for the bad TT calculation. IRS Pub 936 indicates that as soon as you assume a new loan through refinance for the same property the previous loan is considered paid and therefore not counted under the $750,000 interest limitation. When you average the two mortgages $381,056 with the $185, 250 mortgage below that total is under the $750,000 limit and allows for the deduction of the entire $20,276 in mortgage interest paid on these two properties.
Another 1098 is $7,014 for a second home purchase in 2012 so it is part of the equation but not part of the problem. Mortgage balance $189,630. I know I have to include this in my mortgage balance averaging for 2020. That balance come out to $185, 250.
Is TT wrong or am I misinterpreting IRS Pub 936?
