Calculating the average loan value for a new large mortgage in 2022 (in light of the $750k cap).

I'm trying to calculate the right average loan value in light of the $750k cap, for a mortgage taken out partway through the year. Let’s say I take out a $1m mortgage in March (so I have it for 10 months in 2022).

Since I only had the loan for 10 months, when calculating the average loan value, would it be ~$830k or about ~$1m? This average loan value would be used to calculate the % of the paid mortgage interest that can be deducted: either 90%=$750k/$830k or 75%=$750k/$1m. This is unclear in the IRS guidance here using the “Statements” method.

422

Expert Alumni

Apr 18, 2023 7:53:42 AM

The average is calculated by the number of months the loan was secured by the home, not the number of months in the year.

You would add the monthly loan balance and divide by 10 to get the average.

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Calculating the average loan value for a new large mortgage in 2022 (in light of the $750k cap).