How do I calculate my mortgage interest deduction if I have two mortgages (on my principal residence) that exceed $750k when combined, with different rates on each mortgage? for example one mortgage with $800k at 5% and another mortgage with $100k at 6%? Do I deduct the interest on the mortgage with the higher rate first ($100k at 6%), then the remaining balance of $650k at 5%? Or do I have to calculate a weighted average?
For your 2018 taxes, just enter the data in the program and *you* don't have to do anything. The program will handle it for you. Basically, you can only deduct a maximum of $10,000 in mortgage interest, on an outstanding mortgage balance maximum of $750K So the mortgage may be an $800K mortgage, but if the outstanding balance is LESS than $750K on Jan 1 of the tax year, then you're under the outstanding maximum mortgage balance limit. If because of the Interest rates the total amount of mortgage interest paid exceeds $10,000, then you can only deduct that maximum of $10K in mortgage interest.
Note that these limits only apply to personal property such as your primary residence or 2nd home. There are no limits what-so-ever on rental property.