It depends. Here is the recommended steps to report these events correctly so that your mortgages are prepared correctly.
- For the house that was sold, do not list an outstanding mortgage principle in Box 2.
- When you add the second 1098 for your new house, enter the outstanding mortgage principle in Box 2.
Entering this in this manner will ensure that you will not face the issue of a mortgage limitation for mortgage amounts over $750K. This also face scrutiny by the IRS.
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