Posting Deductible (but not all) Mortgage Interest on Schedule A

[TheTaxMan]

In situations where the amount of reported mortgage interest a client receives on Form 1098 in more than the amounts the client can deduct (due to the $1M/$100K rules) do you simply figure out the deductible portion and list that amount on Line 10 of Schedule A without any notation / reconciliation to the total amount of mortgage interest reported on Form 1098 for the year on the return?

Thank you all so very much in advance to your insights into this matter.

[S T]

Detail

I usually show a detail sheet which indicates the amount on the 1098 form, then second line - less amount not deductible, the net amount then carries to Sched A and notes see Statement

Sandy

[sea-tax]

Personally I do it similar to Sandy , however I don't think it really matters aslong as the correct amount is deducted.

[BOB W]

I don't have my thinking cap on but, can the excess interest be classified as investment interest?

[Kram BergGold]

Just show deductible part

I just show the deductible amount. I figure the IRS is not going to care if the amount is less than they are aware of. I have never been questioned on this. So I think it is safe to say either way is ok.

[Koss]

Different Answer

In situations where the amount of reported mortgage interest a client receives on Form 1098 in more than the amounts the client can deduct (due to the $1M/$100K rules) do you simply figure out the deductible portion and list that amount on Line 10 of Schedule A without any notation / reconciliation to the total amount of mortgage interest reported on Form 1098 for the year on the return?

Thank you all so very much in advance to your insights into this matter.

At least in theory, your tax software should figure the deductible amount for you.

Those who follow my threads know that I have often said that serious mistakes arise when people assume that a computer's calcuations must be correct, use the computer's output as their starting point, and then back their way into an explanation of why the output is whatever it is. Sometimes the computer is wrong.

So I actually admire your readiness to do it by hand. But the software should do it for you, unless you bought a counterfeit version of the program that was made in Asia somewhere LOL...

Somewhere on your Schedule A, there should be a question that you can answer with a yes, to indicate that the underlying loan exceeds the thresholds. The yes answer will probably open up a worksheet where you can enter the relevant data...

Your computer, like mine, thinks in ones and zeros. The worksheet you need to use within the program is not visible, or not available, because somewhere in the guts of the Sch. A, you have a field that has a zero in it, that is telling your program that the worksheet is not applicable to this client. Change that field to a one, and you'll get the worksheet.

BMK

[veritas]

Lacerte

does not compute home mortgage interest limitations. I wish it did. I think it is a weak area of the program and have told them so.

[S T]

Burton What Software

So Burton, what software, do you use that calculates whether or not there is a reduction in the Home Mortage Interest deduction?

As with Veritas, and others that may have posted, my software does not calculate, I have to calculate manually and then enter the net deduction.

How nice it would be if the Tax Software vendors would furnish this for us!

Sandy

[FEDUKE404]

Dealing with mortgage interest

Gosh, I never had this problem.

Guess I need to find some wealthier clients, or perhaps just move to California??

FWIW - My software happily "took" $1.1 million without even asking "are you sure?" (Koss did make a valid point.) When/if I encounter mortgage interest that needs to be limited, I will probably just do a worksheet showing the totals reduced by an amount needed to reach the acceptable total.

FE

[S T]

Calif Mortgages

I had more limitations due to real estate values in 2005 and 2006, and the taxpayers in a rush to tap their equity. Now those clients are stuck! Continued and more tracing for me!

CFS Tax Tools does have a worksheet which helps, but my Tax Software does not calculate, I have to manually enter the limitation, and thereby reduce the form 1098 reporting, in hopes the computer matching will be okay.

Sandy

[Bees Knees]

Don't forget to ask every client this year how much of that mortgage was NOT used to buy or improve their home.

AMT add back.

$1,000 penalty per return if IRS catches you messing up the AMT calculation.

[Bees Knees]

Page 2 of TTB organizer for 2007:

❑ Yes ❑ No Did you use any mortgage loan proceeds for purposes other than to buy, build, or substantially improve your home? 14-3

I am going to be looking for every client to check yes or no on that question. If it is blank, I will ask them the question.