Mortgage interest limits

[Bill Todd]

Client purchased a home in Feb 2018 for $1.8 million, putting $200,000 down leaving a mortgage of $1.6 million. In October he sold his previous home, netting $950,000 all of which he used to pay down the new mortgage--leaving him with a year-end mortgage balance of $650,000. Do I have to apportion his interest for the months the balance was over $750,000? Or can I apply the "December 31" principle? (That is, your status on 12/31 is your status for the entire year--married/not, child/not, age, etc.)

Bill

[kathyc2]

Since for 9 or 10 months the mortgage was more than double the allowed amount, not sure why you think it should all be deductible just because the ending balance was below the allowed amount.

[Burke]

Or can I apply the "December 31" principle? (That is, your status on 12/31 is your status for the entire year--married/not, child/not, age, etc.)

That principle is an IRS regulation for age, filing status and dependency status. Not applied to this issue.

[Bill Todd]

I agree that it's not deductible. But it would be irresponsible of me not to get confirmation. Doing what we "think is right" can get us in trouble.

[TAXNJ]

I agree that it's not deductible. But it would be irresponsible of me not to get confirmation. Doing what we "think is right" can get us in trouble.

You are correct.

Hopefully you are not relying on a reply post for a confirmation but rather suggestions for you to further research for an answer that you decide supports your decision.

Relying on a reply post as the final answer may be very foolish.

You have not shown what research you have done so far to get a confirmation. That would help the reply posters.

Have you researched The Tax Book 4-10 as a start for references for your scenario?