deducting two primary mortgages

[tommyb129]

Hi,

Is turbotax calculating this correctly? I bought one home in July 2021 and another in June 2022, both as owner-occupied.

Home 1 (occupied Jan 1- July 13, 2022. rented out from July 13, 2022 onwards):

mortgage interest from 1098: $18,248.03

outstanding mortgage principal: $670,327.07

remaining balance at the end of 2022: $655,498.78

property taxes: $7013.05

Home 2 (bought June 2022, occupied July 13, 2022):

mortgage interest from 1098: $11,202.31

outstanding mortgage principal: $626,099.00

remaining balance at the end of 2022: $621,755.36

Turbotax says my adjustments are $17,164 (instead of the full amount of $29,450). Is this correct? Thanks

[KrisD15]

The portion for the property while rented would be allocated to Schedule E as rental expenses. 

Are you entering in both places, as a deduction for Schedule A (the personal portion) and also on Schedule E (the rental portion)? 

[tommyb129]

Hi and thank you for your response,

I am not sure about schedule A vs schedule E since I am doing it all through turbotax. They have yet to ask me questions about the rental since I am on the Deductions portion of the program online. I was mostly inquiring about the maximum amount of the mortgage interest deduction available (whether their auto-calculated amount was correct of not because if I am able to deduct the full amount of mortgage interest it is the difference of a few thousand dollars in tax return vs paying).

[DaveF1006]

 It depends. Let's break this down so we can ensure this gets reported correctly.

1. First report the rental information. This will ensure that the mortgage interest will be correctly reported and allocated between the rental and the time it was a residence to you. 
2. Go to  federal>wages and income>Rentals, Royalties, and Farm>Rental Properties and Royalties (Sch E)>start or revisit
3. Complete the informational section first. There will be a question that asks if this was your residence in the past. Here you will say yes.
4. There will be a screen that asks if you rented this all year round. Here is where you will say you did not rent this for the full year. Based on this answer, the program asks how many days you use this for personal use and how many days did you rent it. An FYI, 171 rental days elapsed between 7/13 - 12/31. That leaves 194 personal use days. 
5. What you enter here determines the ratio on how your mortgage interest and property taxes are allocated between the rental and your personal residence.
6. There will be a entry you will need to make regarding original purchase price, available date (date it became a rental), and the original purchase date. This is used to prorate the mortgage expenses and property value between your residence and rental date.
7. Next it will ask the fair market value of your rental when rented. If you don't know, use the cost on the original purchase date.
8. Then as you complete the profile summary, in the end it will tell you what the rental will be depreciated by over the next 27.5 years.
9. Now you will enter your rental income and expenses.  When you list your mortgage interest and property taxes, be sure you record the full value of the mortgage interest and property tax. Turbo Tax will automatically prorate your mortgage interest and property tax between the rental and the time you used your home for personal use. These expenses will appear on Schedule A and Schedule E properly allocated.

Now let's report the mortgage interest on your primary residence that you currently occupy.

1. Go to federal taxes>deductions and credits>your home>mortgage interest ....
2. When you open up the first screen, there should be an entry listed from where you recorded it in the rental section.
3. Select add a lender and report the second home.
4. Complete the section reporting your second home.

Now if all of this is reported correctly, your mortgage interest should be correctly  accounted for between your Schedule A and Schedule E.