How to deduct mortgage interest when buying a house in 2022 and selling old house in 2023?
So I've been searching all over and found some info but need some clarity on my situation. We bought our dream home in October 2022 and moved in around November 15th that year. However, our old house didn't sell until March 2023 (market was weird in our area). For tax filing purposes, can I just use the information from the 1098 form for the new house since we lived there for about 1.5 months in 2022? Or do I need to file using both 1098 forms - one for the old house (prorated for 10.5 months) and one for the new house (prorated for 1.5 months)? This is confusing because we were technically paying two mortgages for a few months! Also, the combined mortgage balance for both properties was over $950k if that matters. Thanks for any help you can provide!
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Mason Stone
You'll need to report the mortgage interest from both properties. The mortgage interest deduction is available for qualified residences, which includes your primary residence and one other home. Since you owned both homes during different parts of the year, you can deduct the mortgage interest for both. For your 2022 taxes, you should use the complete 1098 forms from both properties - no need to prorate. The forms will show exactly what interest you paid during the 2022 tax year regardless of how many months you lived in each house. The important thing is that you owned both properties, not necessarily which one was your primary residence during specific months. Do keep in mind the $750,000 cap on total mortgage debt for which interest is deductible for loans taken after December 15, 2017. Since your combined balance exceeds this amount, you may not be able to deduct all the interest paid.
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Makayla Shoemaker
•Wait, I thought the mortgage interest deduction was only for your primary residence? So if I have a vacation home and my main house, I can deduct both mortgage interests? Also, what happens if you rent out one of the properties for part of the year?
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Mason Stone
•You can actually deduct mortgage interest on your primary residence and one second home, so two properties total. The IRS allows this specifically in Publication 936, which covers home mortgage interest deductions. If you rent out a property for part of the year, it gets more complicated. You would need to allocate the mortgage interest between rental use and personal use. For the portion of time it's a rental property, the interest would be reported as a rental expense on Schedule E rather than as an itemized deduction on Schedule A. You'd need to calculate the percentage of days used personally versus days rented at fair market value.
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Christian Bierman
I went through almost the exact same situation last year and it was so confusing! I ended up using taxr.ai (https://taxr.ai) to help me sort through all my mortgage documents. I uploaded my 1098 forms from both properties and it automatically identified the mortgage interest from each property and calculated the correct deduction amounts based on my situation. It even flagged that I was over the $750k limit on mortgage debt and calculated the proportional amount of interest I could actually deduct. Saved me from making a costly mistake since I was originally planning to deduct the full amount from both properties!
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Emma Olsen
•How exactly does taxr.ai work with mortgage interest? Does it just do the math or does it actually tell you which forms to fill out and where to put the numbers? I've got a similar situation but I'm also doing a cash-out refinance this year.
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Lucas Lindsey
•This sounds suspiciously like an ad. Are you affiliated with that company? I'm skeptical because I've never heard of it and suddenly here you are saying it solved the exact same problem.
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Christian Bierman
•It works by analyzing your mortgage documents after you upload them. It identifies all the relevant information from your 1098 forms and then guides you through exactly where to report everything on your tax forms. It even explains which portions are deductible when you exceed the $750k limit. I'm not affiliated with them at all. I found them through a Facebook group for homeowners when I was stressing about my taxes last year. I was skeptical too but they have a free initial analysis that shows you what they found before you pay anything, so I gave it a shot with no risk.
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Emma Olsen
Just wanted to follow up about using taxr.ai that I asked about earlier. I decided to try it with my mortgage documents and it was actually super helpful. I uploaded both my 1098 forms and my refinance documents, and it broke everything down clearly. It explained that I needed to report both properties' interest but flagged that because of my refi, some of the interest wasn't deductible since I took cash out for non-home purposes. It showed me exactly what amounts to put on which lines of Schedule A and even generated a document explaining the calculations in case of an audit. Way clearer than anything my regular tax software explained!
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Sophie Duck
I struggled with getting clear answers from the IRS about my mortgage interest situation for THREE HOURS on hold. Finally discovered Claimyr (https://claimyr.com) and they actually got me connected to an IRS agent in about 18 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed I needed to include both properties' interest on Schedule A, but also explained how to handle the portion that exceeded the $750k limit. She walked me through the calculation step by step. I never would've figured it out on my own without talking to a real person.
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Austin Leonard
•How does this service actually work? I've been on hold with the IRS forever too but I don't understand how another company can get you through faster? Doesn't everyone call the same phone number?
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Lucas Lindsey
•Yeah right, sounds like another fake service. The IRS queue is the same for everyone. How exactly would this service magically get you to the front of the line? I've worked in call centers before and this doesn't make any sense.
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Sophie Duck
•They use technology that continuously calls the IRS and navigates the phone tree until it gets a place in line, then it calls you and connects you when an agent is almost available. So basically they're waiting in the queue for you, and you only get on the phone when they're near the front of the line. It's completely legitimate. The service doesn't actually jump you ahead in the queue or use any special access. They're just doing the waiting for you so you don't have to stay on hold for hours. When I used it, I got a text when they were in line, then another text when I was about to be connected to an agent. I just had to pick up my phone at that point.
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Lucas Lindsey
I need to apologize about my skeptical comments earlier. After struggling with the IRS phone system for literally 4+ hours spread over 3 days, I broke down and tried Claimyr out of desperation. It actually worked exactly as described. I got a text saying they were waiting in line for me, and about 25 minutes later got another text that an agent was almost available. When I picked up, I was connected with an IRS representative within 30 seconds. The agent walked me through exactly how to handle my two-property mortgage interest situation and explained that I needed to use Form 8396 for part of my deduction. I feel a bit stupid for being so cynical before, but honestly couldn't believe something like this existed. Saved me hours of frustration.
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Anita George
One thing no one mentioned yet - if you sold your old house in 2023, but were still paying the mortgage in 2022, you should absolutely deduct that interest on your 2022 taxes! It doesn't matter if you lived there for 11 months or 2 months in 2022, what matters is: 1) You owned the property 2) It was a qualified residence (your primary home or second home) 3) You paid mortgage interest in 2022 The 1098 forms will show exactly how much interest you paid in 2022 regardless of when you sold the house. Just be aware of the $750k combined limit as others mentioned. You'll need to do some calculations if your total mortgage debt exceeds that amount.
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Abigail Spencer
•Does this still apply if the old house was vacant for the last month of 2022? We moved out completely but it didn't sell until 2023, so it was just sitting empty for December 2022.
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Anita George
•Yes, it absolutely still applies even if the house was vacant. The mortgage interest deduction is based on ownership of a qualified residence, not occupancy. As long as you owned the home and it was either your primary residence or second home for some portion of the year, you can deduct the interest you paid. The IRS actually allows for temporary absences (even if you're not physically living there) as long as the home is not rented out during that period. So your vacant house in December still qualifies for the mortgage interest deduction on your 2022 taxes.
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Logan Chiang
Has anyone used H&R Block software for handling two properties? I'm having trouble figuring out where to enter both 1098 forms and how to deal with the $750k limit. The software keeps acting like I can only enter one property!
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Isla Fischer
•I used TurboTax last year for a similar situation and it had a specific section where you could enter multiple mortgage interest statements. Look for something like "I have more than one mortgage" or "Add another 1098 form" option. It should be somewhere after you enter the first 1098. For the $750k limit, the software should automatically calculate this if you enter all your mortgage information correctly, including the date each mortgage originated and the original loan amounts.
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Logan Chiang
•Thanks for the suggestion! I looked again and found a tiny "Add another property" button I completely missed before. Now I see where to enter both properties. Still confused about the $750k limit though - I guess I'll just trust the software to calculate it correctly.
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