For a home office deduction, what does Turbotax mean by excess mortgage interest "included" in the entire-home mortgage interest?

[pher]

When claiming a home office deduction in TurboTax and doing the "actual expenses" method, I am entering my mortgage information. I do have excess mortgage interest (loan amount is over the mortgage deduction limit). On the entire-home "Excess mortgage interest" page, TurboTax says, "If you have excess mortgage interest and it's included in the $[interest paid per 1098] (entire home) mortgage interest reported for this home office, enter 0."

I don't understand what TurboTax means by "included" here. The amount listed in my 1098 is the entire interest I paid for the year  (which by definition includes the deductible mortgage interest amount plus the excess interest amount). So does that mean it's "included" and I should enter 0 on this page? (The reason I'm confused is that if I'm right about that, then I don't understand in what situation it *wouldn't* have been "included".)

Thanks so much for your help ahead of time!

[JohnB5677]

I'm not quite sure what that TurboTax statement means, but the IRS says you can take the full interest deduction, including what was limited out.

Line 14—Excess home mortgage interest.

If you are claiming the standard deduction, 

• enter all the home mortgage interest paid for loans used to buy, build, or substantially improve the home in which you conducted business in column (b) of line 14. 
• Do not include mortgage interest on a loan that did not benefit your home (for example, a home equity loan used to pay off credit card bills, to buy a car, or to pay tuition costs).

If you are itemizing deductions on Schedule A and 

• the amount you figured in Step 1 under Mortgage interest reported on line 6, earlier, was less than the full amount of interest you paid because of the limits on deducting home mortgage interest as a personal expense, 
• include the excess attributable to the loans used to buy, build, or substantially improve the home in which you conducted business in column (b) of line 14.

Example.

If you paid $15,000 of home mortgage interest on loans used to buy, build, or substantially improve the home in which you conducted business but would only be able to deduct $12,000 on Schedule A because of the limits that apply to deducting home mortgage interest as a personal expense, include $3,000 ($15,000 - $12,000 = $3,000) in column (b) of line 14.

Publication 587 (2022), Business Use of Your Home

[pher]

Thanks John — So, I actually understand the overall concept here already. I understand that even though my mortgage interest is limited for Schedule A (when itemizing deductions), it is NOT limited for the home office deduction.

What I need to know, though, is how the TurboTax product is wanting me to enter this in order for it to properly translate it into the filed tax form. Using the example you pasted from the IRS page, let's say my excess mortgage interest is $3,000. But TurboTax is already listing the full interest amount (not subtracting out the excess mortgage interest) in the "$[interest paid per 1098]" part of this statement:

"If you have excess mortgage interest and it's included in the $[interest paid per 1098] (entire home) mortgage interest reported for this home office, enter 0."

So, using the IRS example and the fact that the full mortgage interest is listed by TurboTax: Do I put $0 there? Or do I put $3,000?

Another way to phrase this: Does whatever number I put in TurboTax on this page get directly put into in "column (b) of line 14" (meaning I should put $3,000)? Or does TurboTax do a calculation against some other information I inserted, and I should put $0 here and TurboTax will do the calculation that results in it putting a result of $3,000 in column (b) of line 14?

[ThomasM125]

The number you enter for excess mortgage interest will show on line 14 of Form 8829. It will be subtracted from the total mortgage interest entered as listed on line 10 on that form. However, TurboTax wants you to not make an entry if the excess interest is included in the entry you made for mortgage interest reported for your home office. Either way you will get the correct deduction on form 8829, but it is best to enter $0 in this case as that is what TurboTax is instructing you to do.