Home Mortgage Deduction Limitation Worksheet

[KMACK]

My client sold their personal residence and purchased another home in 2020.  The mortgage loan on the home sold was paid off on the date of sale (end of June 2020) and was under the $1,000,000 limit.  The loan on the new home was $850,000 on the date of purchase (beginning of July 2020) and thus subject to the $750,000 limitation.

When I enter the loan information into the Deductible Home Mortgage Interest worksheet, saying the loan was outstanding for 6 months and was paid off, I get a negative number for the average balance.  This negative amount gets subtracted from the average balance of the loan on the new home (which was outstanding for the second 6 months of the year) and effects the calculation of the limitation.

It seems like the loan on the old home should not effect the calculation of the limitation of the interest on the new home since the loan on the old home was under the limit and the loans were not outstanding at the same time.  Is there a way to enter the data in the worksheet to reflect this?

Thank you,

KMAC

[sjrcpa]

Don't enter the first one?

Only enter the second one and use the monthly average for the # months it existed.

Or manually calculate the allowable deduction and just enter that amount for mortgage interest.

[KMACK]

Using the worksheet automatically makes the result of the worksheet the mortgage deduction on Schedule A.  So if I leave off the first mortgage, it will not get included in the mortgage interest deduction on Sch. A.

I may have to calculate the allowable deduction and just input it on Schedule A as you suggested.  Thank you.

KMAC

[Just-Lisa-Now- · Accepted solution]

Just type the amount of the first one in on Line 8a of Sch A, dont use the 1098 worksheet

[KMACK]

Will do. Thanks.

KMAC