Mortgage Interest Deductions when moved mid 2018

[confused_in_CA]

Hi there,

I moved mid 2018. Previously, I had a $350k principle balance I was paying interest on. Now I have an $850k balance (all numbers approx.).

I know that I can only deduct up to the first $750k of a mortgage with a principle balance >$750k, but since the first half of the year I was a lot less than that limit, will I still be getting credit for the amount >$750k at least until the end of the year, or will I only get the first $750k of the $850k mortgage for 6 months  regardless? 

This affects whether I will pay down to $750k or not until the end of the year. I cannot find anywhere that addresses this!

Thanks very much!

[knowmoretax]

Hello Confused_in_CA,

my interpretation of the facts are that you should be able to include all the interest you paid on both your mortgages for 2018 (assuming you are filing jointly).

Per IRS Pub. 936 - you take an average your debts, for you this would be $600k ($175k of grandfathered debt & $425k of home acquisition debt since law change). Since your average of $600k is less than $750k you are not limited by limits on home mortgage interest deduction.

Look at and fill in the table on page 11 of Pub 936 for 2017 (except on line 3 where it says $1,000,000 cross off this and change it to $750,000. https://www.irs.gov/pub/irs-pdf/p936.pdf#page=11

This is my opinion and you should conduct your own research.

I hope this helps and thanks,

Jack

[PedroPeteCA]

Hi,

I too have a similar question as Confused_in_CA regarding the new mortgage interest deduction for 2018. My wife and I sold a home in Nevada in Feb 2018 ($175,000 loan) and purchased a new home in California in April 2018 ($850,000 loan). Being that the new tax rule limit of $750,000 of allowable deduction for mortgage interest, how much can I actually deduct since I did not pay mortgage interest for the full year of 2018 (only April-Dec). I am a bit confused on how to calculate this. 

Thanks!

[PaulaM]

@PedroPeteCA see this IRS pub, page 11. Do not adjust line 3. That is for grandfathered debt (debt before 2018).