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Level 1

Question

mortgage interest limited

Forum|Forum|6 years ago
February 24, 2020
4 replies
43 views

My daughter and son in law purchased a new home 12/18/18 for $480,000 with a mortgage of $456,000). Their original home did not sell until 2/28/19 for $450,000 (payoff of mortgage was $370,627). They wouldn't be limited in 2019 to the amount of interest they could claim would they?

Alumni - Intuit

Your daughter and son in law are allowed to deduct the mortgage interest they pay on as much as $750,000 of personal residence debt on a first and/or second home.

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Level 15

HOWEVER, you are to use the AVERAGE BALANCE of each mortgage

see IRS publication 936 / page 11

also: from page 13:

You can treat the balance as zero for any month the mortgage wasn't secured
by your qualified home.

so the AVERAGE on the $370,000 mortgage is only $185,000

all the interest is deductible since you are below $750,000 when using the AVERAGE MORTGAGE BALANCE