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Eagle 66
Returning Member

Home mortgage interest deduction when file tax return in two states

Can I deduct the same California home mortgage interest in the itemized deductions in two different states where I filed taxes. I am retired and live in California. I am reporting taxes in California as my primary residency state. I receive deferred compensation from my old company in New York State where I use to work.  Therefore the deferred compensation is from the New York source and I need to file NY tax return. Turbo Tax put the same home mortgage interest for my house in California in both California and New York State itemized deduction. Is it correct that I get to deduct the mortgage interest in both states? Thanks for your help.

3 Replies
WendyN2
Level 7

Home mortgage interest deduction when file tax return in two states

You're not actually getting any benefit on the State level. The States each have their own rates for taxing, as I am sure you know (having worked in NY!) therefore the States' programs require the access of this information in order to calculate what your "taxable situation" is according to their regulations. You are only getting the deduction for mortgage interest at the Federal level. 

Eagle 66
Returning Member

Home mortgage interest deduction when file tax return in two states

I did check Turbo Tax and it used the mortgage interest deduction in calculating the state taxes in both states. My federal deduction maxed out at $10,000 as it happened to most people. I used standard deduction for my Federal 1040 for a lower total tax amount. Turbo Tax calculated my primary state California taxes based on the full earning and itemized deduction with mortgage interest. After calculating the taxes paid to NY state, Turbo Tax deduct the NY taxes from the CA taxes. I guess the difference is very miner when it is said and done. I only benefited the mortgage interest deduction one time in CA tax calculation because what was lower in NY is now not substrate from CA tax. 

ReneeM7122
Level 8

Home mortgage interest deduction when file tax return in two states

Correct, when you live and work in two different states, TurboTax will work behind the scenes to not only calculate the taxes owed to what taxing authority, but it will also figure out exactly whether you should itemize or take the standard deduction while taking other things into consideration (like your mortgage).  Here is a helpful TurboTax article about figuring out what's owed when multiple states are involved.

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