I bought my old place in 2017 and the average loan balance of that place is 454k in 2018, I moved out on July 31, 2018, and converted to a rental starting Aug.1 2017. I am claiming 42.5% rental and 57.5% personal use and split the expense that way. (The loan on that place origination in early 2017)
I bought my new place in 2018 and moved in on Aug.1, the loan for the new place is about 580k .
I know that loan starts before Dec.15 2017 has 1M limit and after that, it has 750K limit.
My question would be :
1. Can I calculate the eligible mortgage deduction amount based on the interest part of my personal use as 454k * 57.5%(personal use percentage for the old place ) + 580k (new place) = around 842k?
2. For this amount, should I use the 750k rule or 1M rule?
Thank you all for your input!
The mortgage used to purchase your primary residence for the first part of 2018 was $454K. The interest on that until August 31is fully deductible. When it became a rental, it became irrelevant to the calculations for your deductible mortgage interest. For the second part of 2018, your primary residence had a qualifying mortgage of $580K, so the interest on it is fully deductible. You don't add the two together, or use percentages to determine the cap.
Thanks a lot for your reply! So in conclusion , i can deduct all of the interest, some goes to schedule E and the rest of it goes to schedule A, and the 750K/1M rule is not relevant to my case, correct?