Can I claim mortgage interest deduction on a state before I purchased the home?

[mxrider108]

During 2023 I lived in California for part of the year (rental) and then moved to NC where I purchased a home with a mortgage.

When filing my CA tax return in TurboTax, I see it is auto filling some amount of Mortgage interest deduction for California even though I never paid any part of the mortgage during the time I lived in CA (I was renting that entire time).

Is this correct? Or should I be changing the CA deduction amount to 0?

[Opus 17]

On a California part-year resident return, you allocate all income and deductions that are atrributable to California-sourced income, and all world-wide income and deductions for the days you were a California resident.  So Turbotax is correct, if you paid 1-2 months of mortgage interest on a out of state property while you were still a California resident, that allocable interest is deductible on your California part-year return.

https://www.ftb.ca.gov/forms/misc/1100.html

[mxrider108]

Thanks for the reply. If I'm understanding correctly, however, it sounds like the interest would not be deductible based on your description?

Because I only started the mortgage for the new home after I moved out of California (no longer a resident). There was no overlap or time where I was paying for the home in NC while living in CA.

In that case I wouldn't deduct anything from the CA return, correct?

[Opus 17]

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@mxrider108 wrote:

Thanks for the reply. If I'm understanding correctly, however, it sounds like the interest would not be deductible based on your description?

Because I only started the mortgage for the new home after I moved out of California (no longer a resident). There was no overlap or time where I was paying for the home in NC while living in CA.

In that case I wouldn't deduct anything from the CA return, correct?

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I don't know the exact dates here.  I thought maybe you bought the house and started paying interest before you moved.

As an example, if you left California on June 30, 2023; purchased your house July 15, 2023, and your first mortgage payment with interest was September 1, 2023, then none of the interest is allocable to California.  On the other hand, suppose you purchased your new house on June 15, and left California on June 30, and your first full mortgage payment was August 1.   In that case, the daily interest that you were charged as closing (to cover June 15-June 30) is allocable to California, even if it is not included in your 1098 from the bank, but the subsequent interest is not allocable to California.

There should be a way in Turbotax to manually assign items of income and deductions to one state or the other.  If you can't find it, you can call customer support to have them walk through the program with you.  

[mxrider108]

Interesting. My scenario is more like the first one you mentioned - I moved to NC before I purchased the home so I don't think anything should be allocable to CA.

When I try to insert "0" for the California deduction (instead of the original value TurboTax had) I get an error saying "The California mortgage interest and points deduction amount should not be less than the federal deduction amount"

[Opus 17]

@mxrider108 

Are you working on a full year CA return or a part-year CA return?  Make sure Turbotax knows you were only a part-year resident and the move-out date is correct.  If that doesn't help, you may need to call customer support to have this researched or to get help.  If you are using the program installed in your own computer, you can go to forms mode and override the calculation, but you can't e-file after performing an override.