Deductions & credits

Yes, your situation is common.  Since there was no overlap of your mortgage loans, your average loan balance can be figured by adding your loan balance at the beginning of the year (Form 1098 box 2 for first loan) to the loan balance on the second loan at the end of the year (easiest to find on your first statement of 2023).  Divide that total by two.   

For example if your beginning mortgage balance was $1M and the ending balance was $600K the total 1.6M / 2 = 800K.  Your loan limit it appears is 750K therefore 750K/800K = .9375.    Multiply your loan interest paid by .9375 to get the deductible portion.  Here are the steps in TurboTax to make the adjustment.  You will start by deleting the 1098 entries to start fresh.

Be advised the mortgage worksheets are not part of the forms that are filed with the IRS.  The worksheets are for your records so be sure to keep your calculations with your tax records.  

1. Deductions and Credits
2. I'll choose what I work on (If desktop)
3. Update Mortgage Interest topic
4. Delete both 1098s
5. Done
6. Update the Mortgage interest topic
7. Yes
8. Put in old loan first
9. Primary Home 
10. None of the above
11. Enter form information from old loan
12. Continue
13. No points to deduct
14. Yes Most Recent
15. Answer the Refi questions as needed
16. Continue
17. Add a lender
18. Same steps as above for the new loan
19. Continue
20. Done
21. Purchase date of first home should be same as the date in box 3 of 1098
22. Purchase date of new home should be same as date in box 3 of 1098
23. Payoff amount for old home and date of payoff
24. Loan balance on 1 Jan 2023 for new loan; leave date blank. Amount should be less than box 2 on 1098
25. Now you should see the page explaining the limitation
26. You can click the help me with this link and see that if you take your loan balance at the beginning of the year box 2 old loan and add it to the balance of new loan at end of year (loan amount 1 Jan 2023) and then divide by 2 the avg will be below 750,000.  Meaning all of your interest is deductible. 
27. In the "Your Adjustments" box enter your calculated interest deduction
28. Continue