Mortgage Interest Deduction

[jsb5]

I had two properties in 2023 (a first and second home) - combined, these loans had a principal balance under the $750,000 limit for full mortgage interest deduction.  To make the math easy, let's just say the loan amounts were $325,000 and $350,000, for a total of $675,000.

One loan was acquired by another servicer, so I have a total of three 1098s that I've entered into TurboTax.  Here's my problem:

When I enter the third 1098 for the acquired loan (let's say the principal on that on that one is $320,000 because it's an acquisition of that first $325,000 loan), TurboTax is now calculating my mortgage interest deduction based on loan amounts of $995,000 ($350,000 + $325,000 + $320,000), when I never had a principal balance over $675,000 at any given time during the year.  

If my mortgage had not been acquired, I would have been deducting 100% of my interest on the $675,000 in loans, but because it thinks I had $995,000 in loans, I'm losing a huge percentage of my deductible interest.  

Any ideas how to fix this issue?

[JulieS · Accepted solution]

Yes, when you enter your 1098-INT in TurboTax, you will get to a screen that says, Is this 1098 the most recent for your loan?

Answer No, if this is the loan that was paid off by the other loan and Yes, If it's the loan that still exists at the end of the year. 

[jsb5]

Thank you, this was the fix I needed!