Mortgage Interest Miscalculation

[Mahmood100]

When you sell your primary house and buy another house, turbotax misclculates the allowable mortgage interest.  If the max allowable mortgage for both houses are $750,000, it should caclulate as follows:

Allowable Interest =($750000/Mortgage1) x Interest1+ ($750000/Mortgage2) x Interest2

Instead it treats them as if you have both houses as primary and second home calculating interest as follows:

Allowable Interest = $750000 x (Interest1+Interest2) / (Mortgage1+Mortgage2)

[hbl3973]

Mahmood100,

IMHO, you are correct.  It is closely akin to a refinance but at least 

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/i-refinanced-and-have-two-1098-f...

says that there has been a problem getting that to work.  I've asked the powers-that-be to evaluate it and let me know if there has been progress.

As a workaround, though, you can do a little algebra:

I1/M1 + I2/M2 = (I1 + I2x(M1/M2))/M1

and treat it as a single original mortgage with interest supplemented by a scaled version of the second mortgage interest.  (Or interchange and use the newer mortgage.)  This works if both hit the $750K limit.

[Mahmood100]

Yes, I had used the same to override Turbotax.  However, I would have prefered Turbotax to fix this issue so others don't get short changed.

[hbl3973]

Mahmood100,

I'm with you and have reported the issue.  Like any large software package, fixes are not instantaneous, but its priority has certainly been bumped up.