Hello TurboTax Community,
I'm using TurboTax to file my 2023 taxes and have a few questions about correctly entering mortgage interest deductions for two properties (second one acquired during the year).
Here's my situation:
- Mortgage-A (Originated in 2015):
- 1098 Reported Interest: $16,197 (for January-December 2023)
- Falls under the rules for loans acquired after October 13, 1987, and before December 16, 2017, which is subject to the $1,000,000 limit.
- The average balance is $523,709, which is within the limit, so the full interest paid ($16,197) is deductible.
- Mortgage-B (Originated on 9/29/2023):
- 1098 Reported Interest: $12,295.03 (for November and December 2023 only)
- Falls under the rules for loans acquired after December 15, 2017, subject to the $750,000 limit.
- The average balance for Mortgage-B is $1,040,946, which exceeds the $750,000 limit. The deductible interest is prorated using "Loan Balance Limitation Proration": 12,295× (750,000 / 1,040,946) ≈ 8,854.71
Total Deductible Interest:
Mortgage-A: $16,197
Mortgage-B: $8,854.71
Total = $25,051.71
TurboTax Adjustments:
- TurboTax calculated a deductible interest of $20,520 using the 'average of the first and last balance' method. However, I used the 'average loan balance method' shown above (outlined in IRS Publication 936) to more accurately reflect the loan balances throughout the year and results in a higher deductible amount. To correct this, I added the additional deductible interest ($4,531) to Line 8b, "Home mortgage interest not reported to you on Form 1098."
- Additionally, my closing document for Mortgage-B shows prepaid interest of -$418.12 (from 10/3/23 to 10/1/23 at $209.06 per day). I added this to the total interest not reported on Form 1098: $4,531 + $418 = $4,949.
Questions:
- Is my calculation of deductible interest correct, especially the proration for Mortgage B?
- Did I enter the additional deductible amount ($5,400) correctly in TurboTax by adding it to Line 8b?
- Is it correct to include the $400 prepaid interest in this calculation, or should it be handled differently?
I want to ensure I'm claiming the right deduction and using TurboTax correctly. Any guidance would be greatly appreciated! Thank you!
