Renting Out Room in Home with Mortgage Over $750,000

I have an interesting situation that I haven't been able to find the answer for. I purchased a home at the end of 2020 and started renting out a room in my home starting April 2021. I received a single 1098 that I now need to split between my Schedule A and Schedule E.

 

I did a bunch of reading from other posts, and am following this publication to work through it:

What I've done:

  1. Calculated what % of the total square footage the rental portion is, and then multiplied that by .75 (9/12 months up for rent). Let's call this X.
  2. I used X to split home-wide expenses, including mortgage interest and property taxes, on my Schedule E.
  3. I then took the balance of the mortgage interest and property taxes on my 1098 and listed them as itemized deductions on my Schedule A.

I'm 99% sure I did the steps above correctly, but here's the kicker.

  • The total mortgage balance listed on my 1098 is over $750k, so I wouldn't be able to deduct it all if I was only filing a Schedule A.
  • However, if I multiply the mortgage balance by X, it drops below the $750k threshold.

Should I be dividing the mortgage balance along with the deductions between Schedule A and Schedule E? Or do they have to fall under $750k total? I know this is a bit weird because I don't think Schedule E rentals are restricted by that same $750k limit. 

 

Would really appreciate any clarity on this matter! Thanks!