First be sure the form 1098 entries are correct. Specifically, check the loan balance on 1/1/2019 (box 2) and the origination date on the loan (box 3). Assuming box 3 is before 12/15/2017, the amount in box 2 is probably above $1M, which limits the mortgage interest deduction.
After you enter your forms 1098 you will get to a question "Did any of these situations apply in 2019?" This is the limiting question. If yes, you will need figure your adjusted mortgage interest deduction.
First, you need to figure out what your average mortgage balance is. To do this:
- Take the balance of your mortgage at the beginning of the year, and add it to the balance of your mortgage at the end of the year.
- Divide this amount by 2 to get your average mortgage balance for the year.
Next, you need to compare your average mortgage balance with the limits ($1M). If your average mortgage balance is greater than the limit, then do this:
- Divide the limit ($1M) by your average mortgage balance to get a percentage.
- Multiply the percentage by how much mortgage interest you paid for the year. This will tell you how much total mortgage interest you can deduct.
If your average yearly mortgage balance is less than $1M, then you get the full deduction. Put the full amount in the adjusted box.
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