If you are doing this in TurboTax you will take the following steps
- Enter the 1098
- Click through until get to "Let's get some details about this loan" and select whether it was a refinance or HELOC
- A drop down will appear, select Yes for the question "Did you use your loan for anything besides paying off the existing loan"
- Next select I used some or all of this loan on a different home or on something other than a home
- Help Me figure it out
- Enter the amount you used on the home and the ending balance of the mortgage
- This will do the calculations for you.
As for how you actually do the calculations...
If you used $10,000 of the $30,000 for home improvements and the other $20,000 was for whatever not related to your home, then you would be able to deduct 1/3 of the interest. (10k/30k=1/3=.333) so if your interest was $3,000, you would be able to deduct $1,000.
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