We sold a home in 2022 and bought a home in 2022 and want to confirm the mortgage interest deduction limit

[tswelsh]

We sold our primary home in June 2022 and bought a new primary home in July 2022.   Both were financed post 2017 so appear to have a $750,000 limit but the examples all speak to owning two homes concurrently.  Our mortgage balances separately, are well under the $750k limit.  But added together, are about $941,000.  Does this limit still apply?

[ThomasM125]

Your mortgage interest deduction will not be limited by the size of your mortgage, since you never owed more than $750,000 at one time.

[tswelsh]

Thanks.  Does that mean I need to use the 'average' process for both mortgages?

[DMarkM1 · Accepted solution]

Yes, together.  Use the mortgage amount on 1 January 2022 for the old loan and add that to the mortgage amount for the new loan at the end of the year (1 January 2023) and divide that amount by 2.  That will give you the average balance for the year.  

Follow these steps to eliminate the limitation on your mortgage interest deduction:

1. Deductions and Credits
2. I'll choose what I work on
3. Update Mortgage Interest topic
4. Delete both 1098s
5. Done
6. Update the Mortgage interest topic
7. Yes
8. Put in old loan first
9. Primary Home 
10. None of the above
11. Enter form information from old loan
12. Continue
13. No points to deduct
14. Yes Most Recent
15. Answer the Refi questions as needed
16. Continue
17. Add a lender
18. Same steps as above for the new loan
19. Continue
20. Done
21. Purchase date of first home should be same as the date in box 3 of 1098
22. Purchase date of new home should be same as date in box 3 of 1098
23. Payoff amount for old home and date of payoff
24. Loan balance on 1 Jan 2023 for new loan; leave date blank. Amount should be less than box 2 on 1098
25. Now you should see the page explaining the limitation
26. You can click the help me with this link and see that if you take your loan balance at the beginning of the year box 2 old loan and add it to the balance of new loan at end of year (loan amount 1 Jan 2023) and then divide by 2 the avg will be below 750,000.  Meaning all of your interest is deductible. 
27. In the "Your Adjustments" box enter the total interest paid for 2022 from box 1 of your 1098s
28. Continue

[Raystratchen]

Hello. I have a similar situation and have some additional clarification questions. I also sold a home and bought a new home in 2022 (and have 2 1098s for this), but I also have an additional 1098 from when the loan on our new home was transferred to a different mortgage company (not refinanced). When it asks "When did you make your final payment" for the loan on our new home that was transferred, should I put in the date that the loan was transferred and the outstanding loan balance at the time of transfer?

My second question is about the next page when it asks for the 1098 interest adjustment. The sum of the loans on my original (sold) home and new home divided by 2 is well below the $750k limit, so my understanding is that I can include the 1098 interest amounts from all 3 of my 1098s in this field. One of my 1098s also includes points - should I add this amount in here as well?

[AbrahamT]

Yes, you will use the date the new lender acquired the mortgage as well as the outstanding loan balance at the time the loan was transferred. 

You can combine the last two mortgages or enter them seperately and include the points from the respective 1098 which the points paid relate to 

See HERE for details. Go further to the bottom "Trying to Use TT."

I hope this works out for you.