I purchased a primary residence in 2023, so owned and lived in it for all of 2024.
Simplified numbers below:
The principal balance in January 2024 was $1.5M.
I made a large payment towards principal in February 2024, bringing the principal balance down to $1.0M.
The 1098 from my lender only lists the initial principal balance of $1.5M, as well as the interest paid.
Thus, TurboTax assumes that only half of the interest I paid is deductible (because of the $750k limit).
However, because of the principal payment early in the year, the average monthly principal balance was just above $1M. So I should actually be able to deduct slightly less than 75% of the interest I paid. This is all according to my understanding of the "Statements provided by your lender" section of Publication 936.
On to my question:
How am I supposed to enter this in TurboTax?
I can override the "Outstanding Mortgage Principal" box for the 1098 in TurboTax, but then it will not match the value provided by the lender.
However, I see no other way to enter an alternate method for computing the Average Monthly Balance.
How am I supposed to enter this?
