How to calculate average balance of home acquisition debt incurred after December 15, 2017 on Form 14900

The "average balance" on Form 14900 for your situation is actually quite straightforward since you only have one mortgage acquired after Dec 15, 2017. You're on the right track - you would use the mortgage principal balance shown on your Form 1098. However, the "average balance" typically means the average of your mortgage principal throughout the tax year being audited. So if your Form 1098 shows your year-end balance, that's only one point in time. You would ideally calculate the average by adding your principal balance at the beginning of the year and at the end of the year, then dividing by 2. Your mortgage statements should provide this information. And yes, you're absolutely correct that the "grandfathered debt" and "acquisition debt before 2017" sections would both be zero since you didn't have any mortgages before 2017.

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One thing nobody's mentioned is that Form 14900 is specifically looking at QUALIFIED residence interest. Make sure the mortgage is on your primary or secondary home, not an investment property. Also, for post-12/15/2017 debt, there's a limit on the loan amount that qualifies ($750k for married filing jointly, $375k for married filing separately).

Anyone know if the interest deduction limits are different if you bought your house in a high-cost area? I've heard something about exceptions for certain housing markets.

Just wanted to add one more thing that might help - when you're calculating that average balance, make sure you're using the principal balance only, not the total payment amount. Your Form 1098 should show the outstanding principal balance at year-end, but if you're calculating monthly averages, don't include the interest portion of your payments. Also, keep all your mortgage statements and closing documents organized in case the auditor asks for backup documentation. They'll want to see proof that the loan was actually used to purchase your home (not a cash-out refi for other purposes). Since you bought in 2022, your closing disclosure should clearly show this was acquisition debt. The fact that you're being thorough about this now will definitely help your audit go more smoothly!