Thank you for providing the formula, I just wanted to double check one aspect of that calculation:
Say the total amount of mortgage interest reported on the 1098 forms is MI, and let us assume that the average loan amount L over the course of the year is above the California mortgage deduction limit of $1,000,000.
For the Federal mortgage interest deduction, the deductible fraction of MI is 750,000 / L. For example for a $1,500,000 loan, MI would have to be multiplied by 0.5 (50%).
For California, the deductible fraction is 1,000,000 / L., so for the same loan, MI would be multiplied by 0.6666 (2/3).
The difference between the Federal and California deduction (in terms of dollars) would be:
MI * (1,000,000 / L - 750,000 /L) = MI * (250,000 / L). = MI * 0.16. E.g. for a Mortgage Interest of $30,000, one could deduct an additional $4,800 on top of the Federal deduction.
Is this correct?
Thanks in advance!
