Mortgage interest deduction - > 750k loan amount (principal residence)

[krishk24]

In 2020, we sold our principal residence (old) in April and bought our current principal residence (new) in Sept.

So in April 2020, our old principal was paid off in full due to fact we sold our old residence (principal for old residence was less than 750k) . We paid mortgage interest for this old home and received a 1098.

We received another 1098 for our new residence for which the loan amount is > 750,000. Now here is my question -

since my new loan amount is greater than 750k, IRS would not let me deduct interest that was paid for my old loan amount that was less than 750 k ? 

I played a few tricks to see if TT would increase my deduction by entering the new loan amount to be less than 750 k, but the amount we owed in taxes did not budge.

So for 2021, should I ensure the outstanding loan amount is less than 750k for new residence by Jan 1 2022 ? how can I ensure I can at least deduct my mortgage interest I am paying in 2021 next year when I prepare my taxes ?

[Mike9241]

the mortgage interest limitation is based on the average balance of mortgages for the year.  and then there's the added complication when the indebtedness at the beginning of the year predates 12/16/17 and then you sell that home and buy a new one thus having indebtedness post 12/15/2017.

the limit is based on the average balance for the year. so say you had $400K debt for 1/2 the year and $  $800K for the other half.  the average for the year is $600K which would make all the interest paid in 2020 deductible.

to further complicate matters the IRS allows computing the average indebtedness balance based on the average for each month. 1/2 the balance at the beginning and ending of each month. then you add the averages for each month and divide by 12