We have a mortgage from Feb 2017 (1M limit) with average balance of 343k. We also have amortgage from 2022 with balance of 692k. should each one be treated on its own?

[mab2343]

pub 936 part 1 seems to treat each mortgage separately but figure A and Table 1 seem to combine both mortgage at the 750k limit.

[AmyC]

Sort of, they are separated by the change in rules yet combined. 

The rules:

• Grandfathered Debt: You can deduct interest on up to $1 million of debt. Your Feb 2017 loan falls here.
• New Debt (Post-Dec 15, 2017): You can only deduct interest on up to $750,000 of debt. Your 2022 loan falls here.

Combining them: - According to IRS Publication 936, you follow a specific hierarchy:

• First, you use your grandfathered debt ($343k).
• Second, you check how much "room" is left under the $750,000 limit.
  • $750,000 (Limit) - $343,000 (Grandfathered) = $407,000 remaining limit.
• Third, you apply your new debt to that remaining room.
  • Since your 2022 mortgage is $692,000, but you only have $407,000 of "room" left, a portion of your 2022 mortgage interest will be non-deductible.
  • If you used any of that 2022 mortgage for anything other than buying, building, or substantially improving your home (like paying off credit cards), that portion of the interest is not deductible at all, regardless of the limits.

[mab2343]

thank you very much!!