Great question! As someone who went through this exact same confusion last year, I can share what I learned. The key thing to understand is that the mortgage interest deduction only helps if your total itemized deductions exceed the standard deduction. For your situation with a $385k house, you're probably looking at around $15-18k in mortgage interest for the first year (depending on your rate). Add your property taxes (~$5-8k typically for that price range) and you might be getting close to the $29,200 standard deduction threshold for married filing jointly. Here's what I wish someone had told me: Don't rush to adjust your withholding in your first year. Calculate your expected itemized deductions first (mortgage interest + property taxes + charitable donations + any other qualifying expenses) and only adjust withholding if you're confident you'll exceed the standard deduction by a meaningful amount. The mortgage interest deduction is great, but it's not automatic money back - it just reduces your taxable income. And remember, you can always make this calculation again next year when you have actual numbers from your first year of homeownership!

I completely understand your confusion - this was one of the most overwhelming aspects of becoming a first-time homeowner for me too! Here's what I've learned after going through this process: The math is actually pretty straightforward once you break it down. For your $385k house with $2,680 monthly payments, you're likely paying around $15-17k in interest during your first year (assuming a rate around 6-7%). Add your property taxes, and you might be looking at around $20-23k in potential itemized deductions before considering charitable contributions or other eligible expenses. Since the 2025 standard deduction for married filing jointly will be around $29,200, you'd need about $6-9k more in deductions to make itemizing worthwhile. This could come from charitable donations, state/local taxes (up to the $10k cap), or medical expenses. My advice: Don't adjust your withholding in year one. Use this first year to collect real data on your mortgage interest (your lender will send you Form 1098), property taxes, and other potential deductions. Then you can make an informed decision about withholding adjustments for year two. The mortgage interest deduction is valuable, but only if it pushes your total itemized deductions above that standard deduction threshold. Take it slow and you'll figure out what works best for your specific situation!

Has anyone tried the "two-earner/multiple jobs worksheet" on the W4? My husband and I both work and I feel like we're always owing a ton at tax time despite both claiming "Single" on our W4s.

I went through something similar when I switched from hourly to salary. The key thing to remember is that the W4 is just instructions to your employer - you're not changing your actual tax liability, just the timing of when you pay it. For your situation making $4,800/month, $950 in federal withholding does seem high unless you have no deductions. A few suggestions: 1. Use the IRS Withholding Estimator first - it's free and official 2. If you're single with no dependents, you might be able to increase your take-home by claiming some estimated deductions in Step 4(b) 3. Don't claim "exempt" unless you had zero tax liability last year AND expect zero this year The restaurant industry can be tricky because tip income affects your withholding calculations. Make sure you're accounting for all your income when using any calculator. And remember - it's better to owe a small amount than get a huge refund, since that's basically giving the government an interest-free loan of your money.

Just wanted to add my experience - I was in a very similar situation with a CP21B after my divorce. The $60k amount you mentioned is substantial, so I'd strongly recommend getting everything in writing before splitting it. Even though your divorce decree specifies 50/50, I'd suggest both of you sign a simple agreement acknowledging the refund amount, the split, and who received the original check. This protects both parties if questions arise later, especially with an amount this large. Also, keep copies of the CP21B notice, your divorce decree section about tax refunds, and any bank records showing the transfer. The IRS might ask questions years later about large deposits, and having clear documentation makes everything much easier to explain. One more tip - if the check comes made out to both names with "AND" between them (not "OR"), you'll definitely need both signatures. Some banks are strict about this even for divorced couples.

I went through something very similar last year with a CP21B notice for about $45k after my divorce was finalized. A few things I learned that might help: First, the timing of when you separated matters more than you might think. Even though your divorce was finalized in 2020, if you separated earlier in 2019, that could affect how the refund should be split according to your decree. Some courts consider the separation date, not the divorce date, for financial matters. Second, make sure you understand what triggered the CP21B. In my case, it was missed business deductions from my ex's side business that we had forgotten to claim. This changed our negotiation since those deductions were directly related to her income, not our joint expenses. Third, consider opening a temporary joint account just for this transaction if the check comes in both names. It's cleaner than trying to get dual signatures at the bank, and you can close it immediately after splitting the funds. The person at work who mentioned taxation was definitely wrong - this is your money being returned to you, not new income. But definitely keep detailed records since $60k will likely trigger some banking reporting requirements. Good luck with the split - having it spelled out clearly in your decree should make this relatively straightforward!

Question - does anyone know if providing snacks/drinks in the office counts under this exception? We spend about $500/month on office snacks and coffee. Is that considered employee recreation under §274(e)(4) or something else?

Great thread everyone! As someone who's dealt with this exact issue, I wanted to add that timing can also matter for these deductions. The IRS looks at whether the event was held during or reasonably close to the business year you're claiming the deduction. Also, one thing I haven't seen mentioned is the "all employees" requirement. Under §274(e)(4), the recreational activity needs to be available to employees generally - you can't just treat executives or a select group and claim the full deduction. If you're doing tiered events (like a nice dinner for managers and pizza for everyone else), that could complicate your deduction. For your specific activities @CosmicCommander, make sure your team dinners aren't too frequent or lavish, as the IRS might view regular expensive meals as compensation rather than recreation. The escape room and company picnic sound perfect for the exception though!

Just want to add another perspective as someone who went through a similar situation. The proportional calculation approach (Option A) is definitely the correct one, as others have confirmed. One thing that helped me was creating a detailed spreadsheet tracking not just the interest payments, but also the original loan amounts, dates, and purposes. This became crucial when I had to prove to the IRS during an audit that my HELOC funds were actually used for home acquisition rather than other purposes. Also, don't forget that you can only benefit from the mortgage interest deduction if your total itemized deductions exceed the standard deduction. With the current standard deduction being quite high, some people find they're better off taking the standard deduction even with substantial mortgage interest. Run the numbers both ways to see what works best for your situation. Keep excellent records of everything - loan documents, closing statements, bank transfers showing how HELOC funds were used. The IRS can be very particular about documentation for mortgage interest deductions, especially with multiple loans.

This is exactly the kind of detailed breakdown I needed! I've been making the same mistake as your Option B thinking - trying to optimize which loans to apply the deduction to first. What really helped clarify this for me is understanding that the IRS treats the $750K limit as applying to the total qualified debt amount, not as a choice of which specific loans to prioritize. So with your $1.9M total debt, you're essentially getting a 39.5% deduction rate across all your qualified interest payments. One thing I'd add for your situation - make sure you have solid documentation that your HELOC was indeed used for the home purchase. Since it sounds like it was part of your original acquisition financing rather than a later equity loan, you should be in good shape. But keep those closing documents and any paperwork showing how the HELOC funds were used in the purchase process. Also worth double-checking the origination dates of your loans against the December 15, 2017 cutoff date that others mentioned. If either loan predates that, you might qualify for more favorable treatment under the old rules.