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Deductions & credits
TurboTax's method of using the first and last month's balance to determine the average is one that is accepted by the IRS, but in your case, certainly not the best option if you just bought a second home in December.
In your case, you can use the average of monthly statements for your second home. The easiest way to calculate this is to take the outstanding mortgage principal in Box 2, multiply that by the number of months you had the loan, then divide by 12. So, for your second home, you will essentially be reporting 1/12 of the amount of mortgage principal if you closed in December. If you choose to do this, you have to make some modifications to override the TurboTax calculation for the second home:
- Report the Outstanding Mortgage Principal in Box 2 as the amount you calculate using the average of monthly statements.
- Report the calculated balance again when TurboTax asks the balance on January 1, 2022.
For the first home, I would report both 1098s as they appear. Make sure to answer No to Let's see if this is the most recent form for this loan for the original loan. That way, the loan balance from that one will not be added to the calculation for limiting your mortgage interest.