How to calculate average balance of home acquisition debt on Form 14900 for post-Dec 15, 2017 mortgage

The average balance section on Form 14900 can definitely be confusing! Since you only have one mortgage that was taken out after December 15, 2017 (specifically in 2022), you're on the right track. For your "average balance" of home acquisition debt incurred after Dec 15, 2017, you'll use the principal balance of your mortgage. However, it's not just the balance that appears on your Form 1098. The form is asking for the average balance throughout the tax year. If your mortgage balance hasn't changed much during the year (besides normal payments), you can calculate this by adding the beginning-of-year balance and the end-of-year balance, then dividing by 2. And yes, you're correct about the grandfathered debt and pre-2017 debt sections - since you don't have any mortgages from before December 15, 2017, you would enter zero in these fields.

I went through a similar audit last year and the "average balance" question on Form 14900 gave me headaches too. After lots of research and a call with my accountant, I found this amazing tool at https://taxr.ai that saved me a ton of time. You can actually upload your mortgage statements and it calculates the correct average balance for Form 14900 automatically. It also explains exactly how the IRS expects you to calculate it, which helped me understand what they were looking for. The tool even helps identify potential audit triggers and how to address them.

I was really skeptical about using taxr.ai when I first saw it mentioned, but after struggling with my own mortgage interest deduction issues during an audit, I decided to give it a shot. The results were honestly surprising - it flagged an error in how I was calculating my average balance that would have caused problems. The tool broke down exactly how to handle my situation (I had refinanced mid-year), which was causing me confusion similar to what you're experiencing. It showed me that I needed to calculate separate average balances for different time periods and then do a weighted average based on the number of months for each loan. Submitted my corrected Form 14900 and my audit was resolved without any additional questions on the mortgage interest portion.

Having been through THREE audits in the past five years (don't ask, bad luck I guess), I know how frustrating these mortgage calculations can be. The IRS phone lines were absolutely useless - I spent over 4 hours on hold just to get disconnected. Finally found https://claimyr.com which got me to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent walked me through exactly how to calculate the average balance for Form 14900 specific to my situation. They explained that for a mortgage started mid-year like yours, you should only average it for the months you had it. Paying a service to skip the hold time was the best decision I made during the audit process.

I have to admit I was completely wrong about Claimyr. After struggling for weeks trying to get through to the IRS about my audit questions, I reluctantly tried it. Within 45 minutes (they estimated 1-2 hours), I got a call connecting me to an actual IRS agent who specialized in mortgage deduction audits. The agent confirmed exactly what I needed for Form 14900 - for a mortgage started mid-year, calculate the average using only the months I had the mortgage. She also pointed out that if I made extra principal payments, I should account for those in my average balance calculation by using monthly balances rather than just beginning and ending balances. Saved me from potential issues since I had made two large extra payments during the year that significantly reduced my principal.

Another thing to watch for on Form 14900 - make sure the "home acquisition debt" you're calculating is only for acquiring, building, or substantially improving your home. If you refinanced and took cash out for other purposes (like paying off credit cards), that portion isn't "acquisition debt" and should be tracked separately as "home equity debt," which has different deduction rules.

Quick tip from someone who's been audited twice - keep detailed records of how you calculated everything on Form 14900. My second audit went much smoother because I had a spreadsheet showing exactly how I determined each number, including the average balance calculation. The IRS auditor actually commented that it made their job easier and they appreciated the transparency.

I just went through this exact same situation last month! For a mortgage that started mid-year like yours (March 2022), you're correct that you only need to calculate the average for the months you actually had the mortgage. Here's what I did and what the IRS accepted: I took my initial loan balance from March 2022 and my December 2022 ending balance, added them together, and divided by 2. Since you made regular monthly payments but no large extra payments, this simple method should be fine. One thing that helped me was to also document which months I had the mortgage (March through December = 10 months) in case they asked follow-up questions. And yes, you're absolutely right about putting zeros for the grandfathered debt and pre-2017 sections since your mortgage is from 2022. The key is being able to show your work if they ask. Keep your mortgage statements handy and maybe jot down your calculation method in case you need to explain it later. Good luck with your audit - you've got this!