Home mortgage deduction limitation when selling old residence w/mtg under $750,00 and new residence w/mtg over $750,000

[mj46]

I have a client who sold their residence and paid off that mortgage which was under $750,000.  They purchased a new residence with a mortgage of $1,230,000.  Reading directions on figuring the home mortgage deduction limitation, I understood the instructions to say to enter each mortgage they had on all qualified homes.  In this situation, I assume it to mean both mortgages, the old residence and the new residence.  When researching in the community discussions, one question similar to my own, was answered by saying to enter the mortgage interest from the home sold (with mtg under $750,000) directly on Schedule A and to use the home mortgage deduction limitation worksheet to figure the interest deduction for the mortgage on the new house (with mtg over $750,000).  I can't find any articles clearly stating this, either way.

[Terry53029]

Just use the worksheet for both 1098's received, or you can just enter the one for the old home on schedule a, because that one will have no limitations, and enter the new one on the worksheet.

[mj46]

If I put it on the worksheet, the interest is reduced.  That is why I've asked this question.  According to the instructions, all mortgages from all homes are input on the worksheet.  But if I enter the 1st one directly on Sch A, I get a different result.  

[sjrcpa]

Doesn't the worksheet have a place to say for how many months each loan was outstanding?

Are you using average monthly balances? Or annual?

I think your worksheet input is incorrect/incomplete.

[mj46]

I'm using the Lacerte worksheet and yes, I've indicated the number of months.  I've entered everything exactly as instructed.  I've included all the mortgages on the worksheet and all mortgage interest have been reduced.  My question is this: Is the loan limit of $750,000 on all loans (together) for the year including the home sold and the home purchased?

[sjrcpa · Accepted solution]

Yes and no. The first home has no limit on deductibility.

The second home does.

That's why people suggested inputting the first one directly on Sch A and using the worksheet/calculating limitations for the second one.

You don't have to use the worksheet if you can't get it right.

Just deduct the correct amount on Schedule A. Document the calculation in your workpapers.