Yes, you can deduct all of the interest on mortgage A but your $750K limit for mortgage B is reduced by the balance amount applied to mortgage A. This is called the exact method. If we assume the balances you provided are the averages, the amount of interest you can deduct on mortgage B is ($750,000 - $355,514) / $1,551,250 * $29,355 = $7,456. Add this to the interest from mortgage A: $7,456 + $2,262 = $9,718. Sucks, I know.
