Mortgage Interest Deductions 1098, Two Properties & Refinance

[pasta1234]

Hello,

I am entering my 1098 statements in TurboTax Premier and i feel it may not be accurately accounting for my particular situation.

Property 1 (Condo) was initially purchased in 2014 for 312k:

1098 Box1: $4,284.88 

1098 Box2: $124,229.73 

Home was lived in until mid-2025 and then became rental property/income.

Property 2 (Primary-House) was purchased in 2025 for 1.43M and then also refinanced in Oct 2025.

Original Loan

1098 Box1: $14,154.11 

1098 Box2: $1,140,571.94

Refinanced Loan

1098 Box1: $6,736.89 

1098 Box2: $1,144,000.00

When i enter all three 1098 statements, the software says something about being limited deductions .

Any advice would be appreciated.

Thanks,

Pete

[pasta1234]

All the reading I'm doing is pointing out that I need to combine the two 1098s for the one property and then enter the other as a seperate 1098 entry.

Can anyone lend a hand on how to do that? 

[DianeW777]

Perhaps. You will have a limited deduction. You can get the right results for both federal and state by entering the mortgage interest using the method below. 

What if I have more than two 1098s?

You should combine all of the 1098s directly related to the home mortgage and enter it as one 1098.  A sale or refinance of mortgages is a perfect example of when this will be the best action. The key is that all of your mortgage interest is included with your tax return if your outstanding principal loan balance is below the maximum of $750,000.  Keep all of your Forms 1098 with your tax return for the details.

Add each box that has an entry and enter it in the same form with the mortgage interest.

NOTE:  The outstanding loan balance should be the actual loan balance, do not add that together from each form.  Use the most recent lender's loan balance when requested for that entry. 

• How do I handle multiple 1098 mortgage forms?
• Where do I enter my 1098 mortgage interest statement?

*The outstanding mortgage on the rental immediately before you converted it should be used.  First figure out that amount. My example is using your numbers without taking the rental period into account.  Once you figure that out, you can change the first mortgage number in this formula with the correct balance on the date it was converted to a rental property.

$750,000 minus the mortgage balance on the first home (using your example) $124,229.73* leaves $625,770.27 balance that can be used from the second home. ($625,770 divided by $750,000). This would give the mortgage interest for the second home.  

• First home mortgage interest plus second home mortgage interest = allowable mortgage interest on Schedule A.  The remainder paid is not used.
• IRS Publication 936 - Worksheet 1, page 14

Note: Some of the mortgage interest will be used on your itemized deductions and the remainder will be rental mortgage interest. Be sure to enter the rental portion manually due to your limitation and do not enter the full amount in the rental entry.

[pasta1234]

• Hello,

I appreciate the information.

I was under the impression since the first home was purchased in 2014 (before 2017) the entire interest could be claimed. Leaving the limit only applying to the second home ?

Is the goal to combine both properties 1098 or combine the 1098s that belong to each property resulting in two 1098s effectively ?

Pete

[ThomasM125]

You are correct, you would use $1,000,000 for the limit on mortgage interest for the first property since it was purchased between 10/13/1987 and 12/16/2017. 

You would make two entries for the Form 1098 in TurboTax. The first one for the Condo and the second one for the primary home that is combined with the refinance loan.