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Do I have to enter 1098 info for second home if I've hit the 750k limit?

Do I need to enter 1098 info (under mortgage interest deductions) for a second home, if I've already reached the $750k limit for mortgage interest deduction on my primary home?

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3 Replies
TeresaM
Expert Alumni

Do I have to enter 1098 info for second home if I've hit the 750k limit?

You are not required to enter the Form 1098 as you are not required to claim the tax deduction and since you have reached your limit for home mortgage interest, it would not change the tax liability on the return. You should keep the documents with your tax information, if there should ever be a question, or if tax laws change.

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Do I have to enter 1098 info for second home if I've hit the 750k limit?

perhaps becuase the interest rates are not the same.

 

say total balance is $1,000,000

so the deductible amount would be 750/1000 or 75% of the total interest paid (both residences) 

 

say on principal residence the debt is $800K and you paid $40K in interest

so the deduction your way would be 750/800*40k= 37500

 

if the other mortgage was $200K and you paid $12K in interest the correct calculation would be

 

 750/1000 * (40K +12K) = 75% of 52K or $39K

 

so in this situation would you prefer a $37,500 deduction or a $39,000 deduction? it could work the other way also. however , temp reg. 1.163-10T(o)(5)(i) would allow you to treat the either mortgage as unsecured and thus would not enter into the mortgage interest limitation computation with one big caveat.

(5) Election to treat debt as not secured by a qualified residence -

(i) In general. For purposes of this section, a taxpayer may elect to treat any debt that is secured by a qualified residence as not secured by the qualified residence. An election made under this paragraph shall be effective for the taxable year for which the election is made and for all subsequent taxable years unless revoked with the consent of the Commissioner.

 

 

 

Do I have to enter 1098 info for second home if I've hit the 750k limit?

Super helpful @Mike9241. Follow up: I converted that 2nd residence to a rental partway through 2022. So most of the mortgage interest is an expense on Schedule E (75% of it). For the period of time where I was living there before it was converted to a rental (25% of the year), I should include that mortgage interest as a deduction on Schedule A, right (per your example)?

 

If I do need to include that 25% of mortgage interest on Schedule A, would I enter 25% of the mortgage interest *and* 25% of the outstanding mortgage principal?

 

And you're also saying that I could choose not to enter that 2nd residence on Schedule A, but then I am forfeiting the option to ever deduct mortgage interest on that 2nd residence in subsequent years?

 

 

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