Yes, you can deduct all of the interest, but there are a couple of conditions.
Single filers and married couples filing jointly can deduct the interest on up to $750,000 for a mortgage if single, a joint filer, or head of household, while married taxpayers filing separately can deduct up to $375,000 each.
With this in mind, it is important to post the i098's correctly. If a mortgage has been paid off, the loan balance is zero. So after you sold the house, the mortgage was paid off. This would be the same for mortgage transfers.
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