mortgage interest limitation

[catchick]

I have two mortgages: one originated in 2013 (2nd home) and the other in 2018 (primary home). My question is why is the 2013 mortgage interest being capped at the $750k limit in the Turbo Tax calculation?  It seems that each morgage interest limitation would be independent of each other, meaning that if the 2013 mortgage is less than the $1m cap, 100% of the interest should be deductible.  What am I missing?

[PatriciaV · Accepted solution]

The home mortgage interest deduction is based on the total average mortgage balance and the date of the original mortgage. 

Your 2013 mortgage falls under the $1MM limit that was in effect until December 2017. Your 2018 mortgage falls under the $750K limit that is currently in effect. 

However, the calculation uses whichever average loan is larger, after applying the limit. For example, if your 2013 mortgage had an average balance of $1MM and your 2018 mortgage average was $750K, your loan limit would be $1MM. But if your 2013 mortgage averaged $500K, your loan limit would be $750K.

In either case, the percentage of interest you can deduct is your allowable limit divided by your actual total average mortgage balance.

You can see these calculations on the Deductible Home Mortgage Interest Worksheet, which you can either view in Forms Mode if you're using TurboTax for desktop or by printing worksheets and forms in TurboTax Online (after you pay).