I filled out the IRS worksheet by hand to check my case, which is a home sale and purchase in 2020. I did not own two homes at any time. The average loan balance over the year must be calculated for each loan, but it seems TT is treating my case as though I owned two homes all year, or did a very simple or biased form of averaging, which imposes an incorrect limit on my mortgage interest deduction. TT doesn't offer a worksheet to compute this, and appears to be depriving me of a third of my allowed interest deduction. I would like a fix ASAP so I can file correctly.
You should get to a screen that says your interest may be limited.
Answer "Yes" to that screen and on the next screen you can enter the amount that IS allowed. Enter the full amount if you used the averaging method.
I believe there is a "help Link" in the program that explains the fact that TurboTax does not provide mortgage averaging but if you are entitled to it, you can certainly report the full Home Mortgage Interest paid.
There is no such screen or help link in the web TT interface. There is no link to the worksheet in Pub 936. There is a multitude of users that appears to be having similar mortgage interest deduction errors. When will TT correct these errors?
There is a "Help Link" that explains the fact that averaging is an option, but not supported in the TurboTax program.
You may use that process, select "Yes" to the screen that asks if your interest is limited and then proceed to enter the allowable interest, up to the full amount.
According to the IRS:
“You have to figure the average balance of each mortgage to determine your qualified loan limit. You need these amounts to complete lines 1, 2, 7, and 12 of Table 1. You can use the highest mortgage balances during the year, but you may benefit most by using the average balances.”