AL State Tax Mortgage Interest Deduction for AL primary residence bought before move

[tgfirst]

When moving to AL, from out of state, if:

 - We purchased our primary AL residence in April 2025

 - officially moved  (closed  on out of state house) to AL in Aug 2025, although lived partially (some weekends, etc) in the AL house some during each of the overlapping months of Apr-Jun

 - AL state taxes & employment started late Aug (everything prior out of state)

Therefore, is the full Mortgage interest and pts for the AL residence starting with April purchase used in figuring the AL state tax mortgage interest deduction (subject to the 750K limits/avg bal/ratios) ?

This makes sense for the AL primary residence (purchase) for a move year, with income and other deductions (like the FICA) and income being limited to the timespans of AL residency.

[AmyC]

The mortgage interest is prorated and the points paid are lost. When you changed your drivers license, registered to vote, car tags, moving service paperwork, etc can show when your residency began. The license is an easy check for the state. At that point, income and expenses begin to accrue. 

AL instructions state: Part-Year Residents Part-year residents of Alabama should only report income earned while a resident of Alabama. Itemized deductions must be prorated to reflect only those expenses incurred while a resident of Alabama. Federal Tax Liability must be prorated by applying a percentage of Alabama adjusted gross income to Federal adjusted gross income in order to calculate the amount deductible on line 12 of Form 40. Part-year residents are allowed to deduct the full standard deduction, personal, and dependent exemptions.

[tgfirst]

Al income is parsed based on dates correlating to W-2's (when AL state tax started accruing).  Both income and itemizing are different dates for me and my spouse.  I moved full time to AL and started AL income (allocated on W-2's) in  Nov, spouse moved full time to AL and started AL income in Aug.  Those "W-2 dates" (from paystubs) correlate to all income, including interest, dividends, capital gain distributions, and gain/losses.  Both dates also correlate to deductions such as FICA (SS & medicare).

For property, it seems logical to attach to ownership dates of AL property, hence utilizing the interest and pts only for the AL primary residence, as well as property tax, especially since it had usage during overlap.   

If for property (primary residence) a later "W-2date" is used then constraining the AL property to interest (and amortized pts) to those later months is an option.....in that case, since the out-of-state house (also primary residence) sold in Nov, should the interest & any amortized pts on the out-of-state sold house be combined in the avg bal/750K ratio limit factor for the overlapping months?

[tgfirst]

So, if restricted to “AL residency” timespans, for AL state mortgage interest,  I can replicate the federal  tables for the months as an AL resident, and compute the avg balance & 750K limit ratio for those months, and then apply to interest paid during those months.  This would include mortgage values and interest for both the AL house bought, and the out-of-state house (sold in Nov) for these AL residency months.   Correct?

Any mortgage points or origination fees paid during AL residency timespans should also be included.

And any unamortized/unused points from the sale of out-of-state primary residence should also be included as the closing sale occurred during AL residency.  Correct?

[RobertB4444 · Accepted solution]

All of those are correct since you became an Alabama resident during that period.