Does the order in which you add mortgage interest (1098) make a difference?

[zomboo]

I am using the desktop version this year but I have used the online version many times. In the past using the online version, the average balance and average acquisition debt were calculated by summing the beginning month and ending month values and dividing by 2. However, Turbo Tax used the ending balances instead of the average balances to calculate the percentage of deductible interest. This benefits the taxpayer and Turbo Tax is apparently allowed to do it this way.

I know in past years, Turbo Tax allowed the user to enter their calculated values directly but that brought on a brand new bag of program bugs and they discontinued it. On the desktop version, I can only see one calculation for the averages on the California State Itemized Deduction Worksheet using the method described above. I don't know what the online version is allowing this year.

If you are getting at least the deduction you figured on getting after having a better understanding on how the limitation works, I wouldn't worry about it. But if you are getting robbed, contact support and let them review you return.

[zomboo]

In a previous response, I said for your heloc that you needed to take the average balance over 12 months, roughly ($75K*2)/12 because it has only been active for a couple of months. After taking another look at Pub 936, I can see why many people think the (beginning balance + ending balance)/2 averaging method is acceptable for your heloc because is not a mixed use mortgages with both acquisition and non-acquisition debt. It is also the averaging method I believe Turbo Tax is using. If you didn't have the $750K limit overall, this averaging method would give you a bigger refund. But with the $750K limit this averaging method gives you a smaller refund.

Pub 936 is very confusing. When you read this section it seems to be going one way and then a little later it goes the other way. I personally think the way I Initially responded is correct but I could be wrong. Remember, unless Turbo Tax has a major bug, their calculations have been reviewed and approved by the IRS.

I apologize for the confusion but I don't want to provide wrong information.