I just got a letter from the IRS and they state I claimed too much of a home mortgage deduction on Schedule A. I'm from CA where homes and mortgages are insane so my loan amount is more than $750,000 and therefore it gets limited. This is made more complicated because I refi'd in 2024 so therefore I have two 1098 forms. In addition I've made some large principal payments. However, I've computed it and it seems that the IRS may indeed be correct and it's $3,000 too large.
My questions are:
1) It's obvious that TurboTax attempted to compute a pro-rated amount as the amount claimed is only 2/3 of what was paid however I can't find anywhere that shows how the calculation was performed. According to the IRS publications there are a number of ways you can compute the "average" mortgage in order to figure out how much of a reduction. Clicking on the number in 8b does not take to me to anything involving those calculations - just has me select one of the two 1098 / worksheets to view what I entered. How can I see how this calculation was performed? There is nothing like Part II of Publication 936.
2) For me, the calculation that gives me the best deduction was taking the loan amount at 1/1/2024 and averaging it with the balance at 12/31/2024. I have no variables in it that would complicate things - no HELOC, no money pulled out, no points, the second loan was smaller than the first. Do we agree that's a valid simple calculation that is correct? Crazy thing is it's a 5 digit number when I compute it that way and it's the same 5 digits in TurboTax's number but a few are transposed (I'm going to just assume that's a weird coincidence).
3) Why does TurboTax's "Home Mortgage Interest Worksheet" look nothing like IRS publication 936?
4) If this is indeed wrong, what's my next step? Do I need to get on the phone and create a support case at this point?
