2 Houses, 2 Mortgages - Can I Deduct 100% of Combined Interest?

[robashmeg]

Trying to determine if I can deduct 100% of the mortgage interest for my homes, as I didn't sell my first home until about 10 months after I closed on my new one.

• Mortgage 1: $300K originated 2012 (qualifies for $1m limit) - sold Oct 2019
• Mortgage 2: $700K originated 2018 (qualifies for $750k limit)

Can I take the full mortgage interest deduction, or do I have to use the worksheet to calculate a reduced amount for the combined mortgage totals?

Thanks!

[Bsch4477]

Sure. You can deduct all of the mortgage interest paid in 2019 on both houses. 

[robashmeg]

I certainly like that interpretation! 🙂 Very confusing - at least for me.  When I did the IRS worksheet it really confused me, as it appeared total mortgage debt exceeding $750k couldn’t be deducted if at least part of it was acquired in 2018 and beyond.  It makes sense that the two mortgages would be treated separately.

I wish TurboTax had this built into their workflow / Q&A.

Everyone else agree with @Bsch4477?

Thanks!

[robashmeg]

Would appreciate any additional input - either contradicting or confirming - from the group!

[AmyC]

You do not need the worksheet you mention but you do need to do some math. Your main home became your second home once you moved out. Page 4 says that a second home held out for resale does not qualify, About Publication 936, Home Mortgage Interest Deduction ...

Therefore, deductible interest is the mortgage interest of the first house, while it was your main home plus the mortgage interest of the second house.

[robashmeg]

Thanks @AmyC .  So to clarify, my "new" main home's interest - by itself - is still below the $750k threshold.  And my "new" second home, which sold last Fall, was also below the mortgage threshold.  Do I treat them individually (and therefore deduct all of the mortgage interest since they independently would be below the limit), or are the calculations based upon TOTAL mortgage debt of the combined mortgages?

Thanks!

[DianeC958]

The amount you can deduct is based on the combined debt for both houses since they are your personal houses and is limited to the amount of interest paid on a loan balance of $750,000, for loan starting after December 2017.

If one was a rental then the amount for the interest paid would be deducted on Schedule E and you could take the full amount of interest paid for your house up to the $750,000 and the full amount of interest paid for the rental property.

Can I deduct my mortgage?

@robashmeg

[debdsnsol]

Question about this answer..."If one was a rental then the amount for the interest paid would be deducted on Schedule E and you could take the full amount of interest paid for your house up to the $750,000 and the full amount of interest paid for the rental property."

@DianeC958 Does this mean I put the interest in when asked for the rental property (I see it on Schedule E)
AND I put it in under deductions where I have the interest for the house I actually own and live in (shows on Schedule A Lines 6 and 10-3 Home Interest Worksheet)? So both houses show on Schedule A?

OR do I have the house I live in on Schedule A and the rental house on Schedule E?

Thanks

[MaryM428]

Only the interest on the loan for the house that is your main home goes on Schedule A.

The mortgage interest for the rental home goes on Schedule E.

Home Ownership Tax Deductions



@debdsnsol