Mortgage interest tax exempt

[NashJ]

Hi,

I have purchased our 2nd home in July, 2023 in SC ( mortgage payment starting from September )
with 1st home being in NC both having mortgages. The mortgage interest on the SC home is higher.
Filing status - Married Filing Jointly.
I am planning to file for legal residence for the home in SC in December for 2 reasons -
1. The mortgage rate provided for the SC home was considering it would be our primary home.
2. Lower property taxes - the special assessment ratio is 4% instead of 6%.
Given the above situation, how does the math work for tax exemption on mortgage interest towards itemization?

1. Mortgage interest is tax exempt for NC home from Jan to Aug (when it was primary) and SC home from Sep to Dec?
OR
2. Mortgage interest is tax exempt for NC home from Jan to Nov and SC home from Dec only (as that is when I will file for legal residence though I closed in July)?
OR
3. Mortgage interest is tax exempt for just for SC home from Sep to Dec?
OR
4. Mortgage interest is tax exempt for just for SC home from Dec (as that is when I will file for legal residence though I closed in July)?
OR
5. Any other scenario which I did not even consider above?

I will be sure to work with a tax consultant but any expert help ( need not be professional ) does help.

Thanks in advance

[Bsch4477]

You can’t arbitrarily decide on your state of residence since that depends on many factors and each state has its own rules. You are wise to get professional tax help which will be more valuable than asking for different opinions on this site. 

[Opus 17 · Accepted solution]

There is no federal tax exemption on mortgage interest. There is a tax deduction.  You are allowed to deduct mortgage interest on your main home and one second home, up to a maximum indebtedness of $750,000.  If your total indebtedness is less than $750,000 and these are your only two homes, then the interest on both is deductible on federal schedule A, and you don’t have to worry about which home was your main home at which time of the year.

If there is a special state tax benefit for a mortgage, then you will have to consider the rules of that state. I’m not familiar with those particular states. However, if you only get a benefit for your main home, your main home is where you live most of the time. It is determined by the facts and circumstances of your life and can’t be arbitrarily chosen for a larger tax benefit.

[NashJ]

Hi @Opus 17 ,

Your explanation made things way less complicated for me to comprehend, to say the least, not having to juggle between multiple scenarios.

Somehow I did not know that one is allowed to deduct mortgage interest on main home and one second home, as it would be the 1st time filing taxes in this situation.

Seems I can use Turbotax only to get my taxes done, maybe a premium service if it gets to itemization or multiple state taxes, which is perfectly fine.

Thanks a lot for promptly sharing your insights!