I want to clarify my situation. In TurboTax Desktop, I correctly indicated the property is a multi-unit (duplex) with 17% rental use. TurboTax instructed me to enter the full mortgage interest under the rental section, stating it would allocate the personal portion to Schedule A automatically.
TurboTax did allocate 17% to Schedule E and 83% to Schedule A, but it did not apply the $750,000 federal mortgage interest cap to the personal portion. That’s why I received a CP28A notice.
My question: What is the correct way to amend? If I reduce the mortgage interest amount so TurboTax recalculates Schedule A correctly, Schedule E will be wrong because it will use 17% of the reduced amount. It will also misstate Schedule CA, since California allows interest up to $1M and my qualified mortgage principal is under that limit.
How should I handle this so that:
- Schedule E shows the correct rental interest (17% of the full amount),
- Schedule A reflects the capped amount for federal purposes,
- Schedule CA reflects the full amount allowed under California law?
