Mortgage Tax Deduction - Two homes

[ramo503]

Im aware that the current mortgage tax deduction is limited to $750k on your residences.  If I have one home that I purchased in 2017 (235k mortgage) and one home I purchased in 2018 (625k mortgage), how does that work?  Am I limited to 1M  (since one house was purchased before 2018) or $750k?  Does it matter that both homes were refi (no cash out) in 2020? 

Turbotax is limiting my deduction this year but didnt last year...

[CatinaT1]

You should not be limited as long as your first house was purchased prior to December 15, 2017.

When you are entering your 1098, you will be asked about the details of your loan. Make sure you are checking that the loan (for both 1098s) is a refinance of a previous loan.

For the house purchased in 2017, you will get a screen that says this:

Make sure you are answering these questions. If you are not seeing these question when you go back to review. Delete the 1098 for the house purchased in 2017 and re-enter it, so you will get these questions.

[AmeliesUncle]

Because the second home was purchased after 2017, you are limited to $750,000.   The prior answer is incorrect.

[zomboo]

Refinancing the loans can effect the calculation of the mortgage limit because the new loan is now a post 2017 loan with the $750K limit. However, in your case the bottom line comes out the same because the balance is less than $750K. You are limited to $750K of the total of averages of both mortgage balances. If the numbers you provided were the average balances, this would work out to $750K/($235K + $625K) = 0.872 (87.2%). So you can deduct 87.2% of the total interest you paid on the mortgages.

Turbo Tax has had many problems calculating the mortgage interest deduction for complicated mortgage situations especially situations involving multiple refinances with non-acquisition interest for years now. In order to do it correctly, Turbo Tax would have to depend significantly on the user to either calculate the deduction themselves according to Pub 936 or enter lots of detailed information.