The mortgage interest paid on the house turned rental is entered as a rental expense, and does not factor into your son's mortgage balance going forward. If the new house was purchased AFTER the first home was turned into a rental, use the higher balance for 2023. The balance on the first house OR his half on the second house.
If the second house was purchased before the first was turned into a rental, you will need to average the first house balance with his half of the second house, (so the overlapping months would be the sum of the first balance and his half of the second)
The balance limit for the Home Interest Deduction is per person, not property. If your son owns half and pays and claims half the interest, he would only report his share (half) of the mortgage balance.
He does need to be on the Deed and mortgage note.
IRS PUB 936
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