Hi all,
We purchased a duplex last year, where we occupy one unit and rent out the other unit. Both units have the same square footage (so, it's 50% - 50%), and we took out a loan of 2M for the entire property. We received one 1098 statement for entire property from our bank.
We have already completed the rental income part, where we have "scaled" the mortgage interest and property taxes by allocating 50% of what's written on 1098 and what we paid in property taxes. Given what I've read, this should be correct.
We are now at the "TAX BREAKS" section, and specifically the "Home Mortgage Deduction" part where we're asked to get over the details from 1098. My question now is: Shall we use the numbers provided by the 1098 (which covers the entire property and hence both units), or can we just input 50% of what's written on the 1098's to Box 1 (Mortgage interest) and Box 2 (Outstanding Mortgage Principal)? I see that, under Box 1, I can tick the box "The interest amount I entered is different than what's on our 1098", so I could modify Box 1. However, there is no such option for Box 2.
I think modifying Box 2 would be important for us since then the effective mortgage amount is 1M (instead of 2M), and hence would increase our deductions. Furthermore, in CA, mortgage interests on 1M would be fully deductible (as opposed to only 750k federal). However, I'm not sure if by doing that, i may cause any issues with IRS and CA FTB since I assume they have a copy of our 1098.
Thank you for your help - your insights are much appreciated
