topic We bought a new home on 12/18/18; loan = $784K. Sold our old home (avg mortgage bal was $514K in 2018) on 2/25/19. How do I compute the avg mortgage bal for the new home? in Deductions & credits

We bought a new home on 12/18/18; loan = $784K. Sold our old home (avg mortgage bal was $514K in 2018) on 2/25/19. How do I compute the avg mortgage bal for the new home?

gogogirlee — Sat, 01 Jun 2019 15:28:12 GMT

Turbo Tax Premier just sends you to IRS Publication 936, but that document doesn't give guidance on partial-year mortgages. I would imagine that a weighted average is needed, but there are numerous ways to calculate that (based on daily balance, or monthly balance, to name a couple).

Both homes were our primary residence, the mortgages just happened to overlap for a couple of months until we sold the first home. Please help! I will have the same problem next year, but with the first mortgage (since we had that one for only two months in 2019).

You treat the two loans separately. You can deduct 100%...

Opus 17 — Sat, 01 Jun 2019 15:28:14 GMT

You treat the two loans separately.

You can deduct 100% of the interest on the old loan assuming it was acquisition debt. If the loan included equity debt, you have to make an adjustment.

Your new loan was $784k for the entire time you had it. The only interest you paid was daily interest on your closing statement from 12/18 to 12/31. You can deduct 750/784 or 95.66% of that interest.

Thank you, Opus 17! That seems perfectly logical. For som...

gogogirlee — Sat, 01 Jun 2019 15:28:16 GMT

Thank you, Opus 17! That seems perfectly logical. For some reason though, the worksheet provided in Pub. 936 has you sum the home acquisition debts together. I don't understand why they have it that way. Are you supposed to fill out one worksheet PER HOME? Because then it would make more sense and be in line with what you're saying.