Hi Maya,
I am running into a situation where I think people who own multiple homes will face same issue.
Here is my case
I own a home since 2017 then I purchase 2nd home and move to 2nd home in 2020. Thus I got two mortgages, one for the 1st home with 750,000 and one with 2nd home with 800,000 starting Oct 2020.
In 2020, I paid $20,000 mortgage interest for 1st home, and $5,000 for 2nd home since Oct 2020.
If I enter both 1098 in turbotax online, turbotax will take both 1098 and do a simple division which I believe is
(20,000+5000)/ (750,000+800,000) * Federal limitation (750,000) = $12,096 deduction which is incorrect because based on IRS publication, it should take the first mortgage for interest deduction
https://www.irs.gov/pub/irs-pdf/p936.pdf
which should be $20,000 deduction.
Is this a known issue? It sounds like it will leave a lot of money on the table for multiple home owners.
I am also wondering if the issue is fixed, and I enter two 1098 as I should be doing, when filing state tax, will Turbotax be smart enough to check state mortgage interest deduction limitation and apply the different limitation e.g. for California, the allow deduction mortgage amount is 1 million. So my expectation for California deduction is $20,000 + $5000 * (1million - 750,000) / 800,000 = $21,562.5
Last, please correct me if any of the expectation or logic is incorrect, and how it should be filed. If the expectation is correct, and it is Turbotax issue/limitation, how can I adjust it for 2020 or is there a workaround for it? Also will it be fixed on 2021 as I would like to know whether I should make a purchase and continue to use Turbotax online next year? preferably I want to keep using it as all my files are stored with Turbotax online.
Much appreciated and hope we can clear the issue.
