Using TurboTax desktop and when I enter ~$25,000 in mortgage, interest, property taxes for a new home I purchased in 2021, my taxes payable only go down by less than $1,000. When I enter some Charitable Contributions, the decrease is much more material. Is there anything in the tax rules that is limiting the impact of my deduction for new home costs? (Mortgage is less than the $750K, and the proper tax amount is limited to $10K).
Hoping I'm missing some in my inputs..
Thanks
There are two possibilities, either you had to cross the threshold to get to the point where you were itemizing your deductions, or your mortgage interest is being limited.
To start using itemized deductions, you must first exceed the standard deduction. Depending on your filing status, this can be up to $25,100 or even higher if you or your spouse or over 65 or blind. It's possible you did not see your results budge much from entering your Form 1098 because most of the allowable deductions just got you to the point where it became more advantageous to itemize your deductions. Once you got to that point, you started seeing an improvement on your tax return for every dollar you entered as a charitable contribution.
The other possibility is that your mortgage is being limited, even though your new house is under the thresholds both in property taxes and home acquisition debt. Did you also report a Form 1098 on your old home? If so, TurboTax adds together the outstanding mortgage principal reported on both homes and then applies the limit based on the sum. Even if your old home had $500,000 of outstanding mortgage and the new one has $700,000, TurboTax would only calculate 750/(500+700)% as the allowable interest. If that is what is happening, I can let you know how to enter both 1098s to more accurately reflect your average mortgage balance.