Hello. I sold a home and bought a new home in December 2021. The loan balance for my old home was 400K, and the loan balance for my new home is 1.1M (above the 750K limit for married filing jointly). When I enter the 1098 mortgage interest information for my old home as a deduction in TurboTax, I receive the full credit for the 10K in interest paid in 2021 (Jan - Nov). For my new home, I enter the 3K in mortgage interest paid in Dec 2021 as a deduction, but TurboTax then calculates my allowable mortgage interest deduction as only 6.9K and my refund goes down. If I delete the mortgage information for my new home, then my allowable mortgage interest deduction goes back up to 10K. I understand there is a limit of 750K for which my new home is over, but shouldn't I receive the full credit for the interest paid on my old mortgage that was under the 750K limit (all 10K in mortgage interest) and a portion of the interest paid on my new mortgage which is over the 750K limit? Thank you!
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Form 1098 is an informational form used to prepare your tax return. The IRS allows you to use the Average Mortgage Balance in determining your mortgage interest deductibility. Enter only one 1098 using your average mortgage balance and the total of any deductible items on both 1098 forms. This will put your mortgage balance below 750K for 2021 allowing you to take up to 10K in mortgage interest deduction.
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