You are correct, the IRS allows for mortgage interest to be deductible on the first $750,000 of mortgage for your primary and secondary residences. Since the outstanding mortgage balance reported on your 1098s would yield a total amount above $750,000, you can use the average mortgage balance prescribed by the IRS. According to the IRS, for any month the loan was not secured by your home, you would use 0. So if you sold your condo in June, your outstanding mortgage was approximately $450,000 for January through June and $0 for July through December. The average would be $225,000. You can find the exact amounts on your monthly mortgage statements.
Likewise for the new home. If you acquired it in June, your balance would be $0 for January through May and approximately $720,000 for June through December for an average outstanding balance of $420,000.
You can calculate the exact average balance for each loan and use that as the outstanding mortgage balance. Document your number using your monthly mortgage payments. Once you enter the average balance into TurboTax, you will be beneath the IRS threshold of $750,000 and your entire mortgage interest will be deductible.
