In 2020, I itemized my deductions and TT alerted me to calculate a % of my mortgage interest since the loan was >750k. No alert this year so is it done for me?

[shannon404]

Last year, the total amount I entered for mortgage interest paid was only a percentage of what I actually paid (I did the math to calculate what the IRS would allow per the TT instructions).  This year, TT is asking for what I paid and doesn't indicate that I should calculate anything different although the tax laws are the same.  Are the calculations being done behind the scenes or do I need to adjust the amount I enter?

[DaveF1006]

It depends. To answer your question, I ran a test scenario in Turbo Tax. I entered $950,000 as the outstanding loan balance and $34,000 as mortgage interest paid. Turbo Tax deducted the entire $34,000. I did not receive any alerts to adjust my mortgage interest paid.

The limit is still $750K so do make those adjustments the same as last year.

[shannon404 · Accepted solution]

@DaveF1006 So I understand...in your test scenario, since your loan is over $750k, you'd need to manually adjust the total interest you paid to $26,842 (because only 79% of it is deductible). Is that correct?  TurboTax isn't calculating that for you and doesn't alert you to do so.

The process would be as follows:

-Calculate the percentage (750k / total loan amount)

-Multiply percentage by $total interest paid to  determine how much is deductible

-And then when TurboTax asks how much interest you paid, DON'T enter the actual amount, enter the adjusted calculation?

[DaveF1006]

Yes, that is correct. 

[shannon404]

Very helpful-Thanks!!