@sjrcpa 

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@sjrcpa wrote:

but for home purchased in 2022 the loan wasn't outstanding all year so that's too high.

Use average monthly balances.

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Based on the IRS guide how to calculate the average balances, seems, it does add up to be about 1.2M for both loans. 

Per the pub.

1. Enter the balance as of the first day of the year that the mortgage was secured by your qualified home during the year (generally, January 1) _____
2. Enter the balance as of the last day of the year that the mortgage was secured by your qualified home during the year (generally, December 31) _____
3. Add amounts on lines 1 and 2 _____
4. Divide the amount on line 3 by 2.0. Enter the result

Mortgage 1 smaller loan: Jan-December, so you sum up the balances in January and December and divide by 2 to get the average. So, let's say Jan balance was 320K and December balance was 318k. Add 2 and divide by 2 would be $319K

Mortgage 2 larger loan: July-Dec, similarly sum up the balances in July and December, divide by 2 to get the average. Lets say July balance was 903K, and December 899K so the average is 901K

Then add both and the total average of both loans is indeed about 1.2M as OP mentioned in his post. The the percentage limit applies. 

And if we use the average monthly balances method as the IRS allows as well, then the result would be close to the same as above. Per IRS:

"For each mortgage, figure your average balance by adding your monthly closing or average balances and dividing that total by the number of months the home secured by that mortgage was a qualified home during the year. "

I have to say these IRS guidelines don't quite make sense for someone who obtained mortgage over 750k mid year. But that's how they tell you to calculate it? If so, seems, the Proseries worksheet does calculate it correctly with both loan balances to be about 1.2M?