Hello,
I had two mortgages in 2024 both in total higher than the limit of 750k, so I need to calculate average mortgage balance to figure out what portion of the interest paid is deductible. My main loan is straightforward as I have beginning and ending balance, however my second loan I only had it for 5 month and then I paid in off in the beginning of June.
Based on IRS publication 936 there are a few methods to calculate balance:
1) "Average of first and last balance method." - doesn't work because of "You didn't prepay more than 1 month's principal during the year.", since I did prepay more than 1 month's principal
2) "Interest paid divided by interest rate method." - seems like it doesn't work as well because "if at all times in 2024 the mortgage was secured by your qualified home", since I paid it off, half of the year it was not secured by my home
3) "Statements provided by your lender." - is the only option that works for me, I'll need to sum up beginning balance of every month and divide by the number of months. My thinking is that I'll also be able to use only a part of the last month (when I paid it off) e.g. I paid it off on 3rd of June thus I can only use 3/30 of the month of June and also I'll need to divide the total amount (sum of all balances) by 5.1 (5 months + 3/30 of the month).
Is my thinking correct, or am I missing a different/better method to calculate the balance? Thanks in advance!
