Turbo Tax Question: Multiple 1098 with home sale & purchase same year. Mortgage Interest isn't working correctly

[jpashkowsky]

In 2024

-Sold a home in May with a mortgage of $408,000 which I paid interest from Jan - May

-Purchased a home in August with a mortgage of $720,000 which I paid interest from August - December

Even if I put in that the first mortgage is paid off in May, it is calculating the interest payments and limiting it as if there are 2 mortgages.  How do I handle this in Turbo Tax?

[AmyC]

Your average balances are below the limits. The program is trying to do the math and you just need for the actual tax form to be correct.

Change the balance on the first house to $1or $1,000- just a little something to keep your balance total below $750,000 for the year and allow all of your numbers to flow correctly onto your tax return.

[zomboo]

Turbo Tax is adding the average balances together and applying the 750K limit: 750K /  (408K + 720K) = 66.5% of your total interest is deductible. This is in accordance with the simplified method in Pub 936 and the only method Turbo Tax uses. However, it doesn't apply to you because the sum of your mortgages never exceeded 750K during the year (see the first paragraph under 'Table 1 Instructions' on page 10 of Pub 936).

Enter your 1098's without modification and continue on until you get to the 'Your deduction is being limited' screen. This is where you can enter your total interest paid.