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