To the best of my knowledge I've split the interest on the converted primary home to Schedule A and Schedule E, based on the date of occupancy (modifying the interest on the 1098 for the reported section). I think a fraction (based on the 750k limit from Pub 936) of the interest of the new loan for the new house and all of the points should also be deductible? Is this right?
Further Details (adjusted/simplified for privacy):
- Home 1:
- bought mid-2017
- outstanding mortgage balance in 2022 is 550k at beginning of year
- moved out mid-may 2022
- converted to rental
- first tenant from aug 1, 2022
- total year 20k interest
- Home 2:
- bought and moved into mid-may 2022
- outstanding mortgage balance in 2022 is 1100k at beginning of term
- paid 15k points
- total year (from mid-may) 25k interest
- two 1098's for this home, since initial mortgage holder sold to another bank
Both Home 1 and Home 2 were primary residences for different portions of the year, split by mid-may.
For mortgage interest specifically, I've split the interest on Home-1 by occupancy (7k as primary, 13k as rental) - in turbotax I report the 13k as rental expenses and the 7k as modified interest on the 1098 for that home. I then also include the other two 1098's.
As I understand it from Pub-936, due to the 750k limit post 2017, I think that only 750/~1100 = ~68% of the interest for Home 2 is deductible. Which is 68% of 25k = 17k. All of the points paid on Home 2 should also be deductible since it is the primary residence.
I believe this should be a total deductible interest+points of 7k+17k+15k = 39k. However TurboTax seems to be showing only ~18k of deductible interest.
