Sold And Purchased A Primary Home In The Same Year With No Overlap

I sold my primary home on 03/31/2025, and purchased another home on 04/01/2025, so there was no overlap. When I enter my 1098's into TT, nowhere do I see where I can tell the system that information. TT is adding the 2 mortgages and the HELOC together and limiting my Mortgage Interest Deduction as if I had both homes at the same time. Publication 936 is not very helpful.

Loan A:

-Bought a primary residence in 2006.

-Mortgage was refinanced a few times over the years.

-Interest was 1.3K for 2025.

-The home was sold on 03/31/2025, at a gain just shy of the $250K Max Home Sale Exclusion for a single person. I had a balance of $223K at closing

HELOC on Loan A:

-Opened in 2022.

-Interest was 2K for 2025.

-The home was sold on 03/31/2025, at a gain just shy of the $250K Max Home Sale Exclusion for a single person. I had a balance of $73K at closing

Loan B:

-Bought a new primary residence on 04/01/2025.

-Mortgage is $686,945

-Interest was $27K for 2025.

How do I enter this information into TT so that TT is not counting Loan A, HELOC, and Loan B as part of the $750K limit for Home Interest Deduction?

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Sold And Purchased A Primary Home In The Same Year With No Overlap

You need to enter zero into the program for the first house loan balances. When you sold the first house, the mortgage balances went to zero. This will prevent adding those numbers in for a false value.

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Sold And Purchased A Primary Home In The Same Year With No Overlap

You need to enter zero into the program for the first house loan balances. When you sold the first house, the mortgage balances went to zero. This will prevent adding those numbers in for a false value.

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Sold And Purchased A Primary Home In The Same Year With No Overlap

So, although Box 2 of the 1098 has an amount, I should put $0 for Loan A and the HELOC? I thought since the form is reported to the IRS, they would be looking for an amount there. It seems like TT should ask somewhere in there if you are still the owner of the home. to trigger it not to count it.

Sold And Purchased A Primary Home In The Same Year With No Overlap

Yes, enter $0 in Box 2 for Loan A and the Heloc. This will ensure that TurboTax won't add to the mortgage balance and make the total debt over the $750,000 limit ($375,000 if MFS).

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Sold And Purchased A Primary Home In The Same Year With No Overlap

Assuming that Loan A and the HELOC were paid off, wouldn't it be better to enter the information from the 1098s correctly and then uncheck the box that specifies the loans are secured by the property?

Sold And Purchased A Primary Home In The Same Year With No Overlap

No, the loans must be secured by the property in order to be deductible.

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Sold And Purchased A Primary Home In The Same Year With No Overlap

@AmyC It's true that the debt must be secured by the home in order to be deductible but @MikoWest wants to exclude Loan A and the HELOC from the mortgage interest calculation in order to deduct all of the interest from Loan B. You can't zero out the outstanding principle balance (1098 box 2) in order to reduce the total mortgage average balance, increase the percentage of interest deductible, and then include the interest from Loan A and the HELOC in the deductible interest. You can, however, treat Loan A and the HELOC as unsecured, forfeiting the interest deduction on Loan A and the HELOC and taking all of the interest on Loan B as a deduction.

Sold And Purchased A Primary Home In The Same Year With No Overlap

I understand what you are saying and that is a concern for some, In this particular case, the amount never exceeded $750,000 throughout the year so it wasn't a concern. If the houses had interest concurrently rather than consecutively, then an adjustment would need to be made on the adjustment screen after the program says your mortgage interest is being limited.

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Sold And Purchased A Primary Home In The Same Year With No Overlap

@AmyC You pointed out a fact that I overlooked. You are correct. Since the total acquisition balance never exceeded the $750K limit during the year, all of the interest on Loan A, HELOC, and Loan B is deductible. This is specified in the first paragraph under 'Table 1 Instructions' on page 13 of Pub 936 (2025) so why the need to zero out entries from the 1098s?

Sold And Purchased A Primary Home In The Same Year With No Overlap

TT was adding all 3 together. So TT recognized the mortgage amount as $982K (2 homes instead of 1) and limited my home loan interest deduction, because $982K is greater than $750K instead of allowing me to put somewhere in the system that I had sold the first home. Zeroing out the 1098 forces TT to not include the home that was sold therefore putting me under $750K and allows me to deduct the interest for all 3 loans.

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