I can't seem to get a clear understanding of what the $750,000 mortgage balance limitation (post-2017 purchases) applies to for the Schedule A mortgage interest deduction when you have two homes.
Here's my scenario:
- Home A is my primary residence, purchased in May 2024, with a mortgage balance of $650k.
- Home B I lived in for 4 months in 2024 prior to purchasing Home A, was purchased in 2018, with a current mortgage balance of $300k. Home B is now a rental (I meet the 14 day or 10% of rental time personal use requirement).
What does the mortgage interest limit apply to?
- The total of the mortgages for Homes A and B together ($750k/$950k = 79% limitation), or
- each home individually (full deduction on both houses, where Home B deduction is 1/3 of the mortgage interest due to personal use, 2/3 is used as deduction on Schedule E)?
If the limit applies to the total mortgages of both Home A and B together
The mortgage interest on Home A ($27k) is higher than the limited deduction of the total of the mortgages for Homes A and B together ($25k). Can I choose not to include the mortgage interest deduction on Home B and deduct the full amount of Home A mortgage interest?
