I I converted my primary residence into rental for last 5 months. I paid total mortgage interest of 27,118.90 and property taxes of $2619.18. I put $15,782 (27,118.90 /366 * 213) of mortgage interest and $1,524.27 for property taxes in 1098 for 7 months. In Schedule E, I put the total amount and it has shown it automatically prorated $1,094.00 for real estate taxes and $11,337.00 for mortgage interest, which seems accurate.
In my tax break, it should show $15,782 + 11,337 = 27119 in Mortgage Interest and Refinancing (Form 1098) but it is showing $31,564.00. Also, Property (Real Estate) Taxes showing $3,049.00 instead of $1,524.27 + $1,094.00 = $2618.27. Why is it happening? How can I fix this?
You should go back to where you entered the amount into your itemized deductions for schedule A and delete your entry that you made there. The system has automatically entered the portion not used for the rental into schedule A and added it to the mortgage interest that you put in there.
Additionally, mortgage interest is only deductible for the first $750,000 in mortgage debt that you have. So if the amount in box 2 of your 1098 is greater than $750,000 then your mortgage interest deduction for the non-rental portion would be reduced.