The issue here is that starting in 2018, mortgage interest deduction at the federal level is allowed only against the first $750,000 of loans taken out after 12/15/2017. California kept $1,000,000 as that figure. So if the mortgage balance is more than $750,000, multiply the federal mortgage interest deduction by the ratio of [MIN(Balance,1000000)/750000-1] to get the CA adjustment. To compute "the" mortgage balance for both federal and state, IRS publication 936 (https://www.irs.gov/pub/irs-pdf/p936.pd) suggests you use an "average balance" as they detail to minimize the value to use in the calculations.
