Here's the problem I am facing: Average mortgage principal on original home (mortgage prior to 2017) is about $420k. Bought new home at the end of August 2019. Average principal on new home was $740,000. Obviously this pushes us over the $750k limit. Full year of interest on old house was about $19,500, and the total interest paid on new house was $9400. But after running through the worksheet, it seems the max deductible is only $18,685, which is less than I would have deducted if just ignoring the new house entirely. I feel there is something I am missing (e.g. some way to pro-rate the calculation since the new house was only owned for 1/3 of the year).
It seems reasonable that all of the interest on the 1st house from Jan-September should be deductible, and the interest from September - December should have the 750k limit applied, but it does not seem like it works this way. Am I missing something?
