If I get a second mortgage that have a higher interest rate, can I choose to deduct interest from second mortgage?

[Curious_panda1]

Hello,

I have a 750k mortgage on my primary resident at a rate of 2%. Which I can deduct the full amount of interest. I am thinking of purchasing a second home. Given the current interest rate, the mortgage interest will probably come out to be 7-8%.

Due to the 750k cap on allowance of mortgage interest deduction.  Can I deduct interest from my second mortgage instead of my first mortgage to get the best deduction result?

[Opus 17 · Accepted solution]

No.  Per the worksheet in publication 936, you aggregate your mortgage balances and your interest for the calculation, so effectively, it will be a blended interest rate.  You can't choose to solely deduct one or the other. 

https://www.irs.gov/pub/irs-pdf/p936.pdf

**Note, there is a provision that allows you to treat a mortgage as "not secured by your home" for tax purposes.  That would (in theory) allow you to declare that the loan on your main home is not secured by the home and therefore not eligible for the interest deduction, therefore the interest deduction would only be based on the mortgage on the second home.  This treatment is usually only used when the home is used for business and you plan to deduct the mortgage interest as a business expense, or if you want to take out a second mortgage/HELOC and use it to buy some kind of investment, and you want to use the investment interest deduction instead of the mortgage interest deduction.  The decision to treat a mortgage as "not secured by the home" can't be reversed unless you get permission from the IRS, so if you make this election, you can never again treat your main home mortgage as deductible, even if you sell the second home.  So I would not do this without extremely competent professional advice.

[Mike9241]

no. the law requires proration see IRS PUB 936

 so if you had two $750K mortgages for a full year about 50% of the interest on each would be deductible.  

in fact, it's the average balances that are used. so if one had an average balance of $740 and the Other had an average balance of $700 and you paid $90K in interest on both mortgages your mortgage interest deduction would be

$750K (max) divided by average balance of $1440 times $90K = about $47K