You can deduct the full amount of your mortgage interest.
As long as your home is security for the debt, in other words, if you don't pay they get the house, your combined refinanced acquisition debt (money used to buy, build or improve the home) and home equity debt (money used for anything else) does not exceed certain limits you can deduct the full amount of the mortgage interest.
Clarification: Publication 936
In your example you are correct - acquisition debt is $85,000.
The home equity debt is $90,000 which is less than the maximum $100,000 and the home's value less acquisition debt ($200,000 less $85,000 = $115,000)
To record your mortgage
interest and mortgage insurance premiums if applicable you can use the steps
below.
1. Sign into your TurboTax account (online or desktop) and select your return.
2. Use the Search box in the upper right
3. Search for mortgage interest
4. Jump to mortgage
interest (see image attached)
5. Begin the entry of your
mortgage interest (see image attached)
(Edited: 03.18.2017 | 10:07a PST)
