lyu
Returning Member

Deductions & credits

Is my understanding below correct? For simplicity let's say principal of the loan is $1M, interest on the mortgage is $16k, and 25% of the house was rented out throughout the entire 2022.

 

Schedule E: claim $4k of mortgage interest (16k * 25%) 

Schedule A: claim $12k of mortgage interest (16k * 75%) 

  • If TurboTax automatically reads in form 1098, we need to manually overwrite mortgage interest at this step from $16k to $12k
  • Actual mortgage expense deductible in Sche A will be around $9k (calculated as 12k * $750K limit / $1M): this part is automatically handled by TurboTax (and it's just a shame to not be able to claim the full $12k even though we'd be right at the $750K limit if we removed the rental portion of the loan principle)

Is my understanding correct?