Question

How to do Deductible Home Mortgage Interest adjustment for California?

Forum|Forum|5 years ago
March 21, 2021
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Hi there! My questions is how do I make adjustment to deductible home mortgage interest for California, on CA form 540, Part II, Adjustments to Federal Itemized Deductions, line 8, column C

So my home mortgage has a principle over 1M. It started before 2017 December. For my federal return, TurboTax correctly calculated that the deductible interest amount is 1M / average principle * total interest paid.

For California state return, per the CA form 540 instructions (https://www.ftb.ca.gov/forms/2020/2020-540-ca-instructions.html, Line 8 – Home Mortgage Interest), I should be able to use 1.1M as allowed amount to calculate.

Among the final forms Turbotax exported, I can see that there is a "Deductible Home Mortgage Interest Worksheet" attached to CA state return, calculating a different dedictible interest amount based on 1.1M / average priciple * total interest paid. However, this calculated value is not used anywhere. The CA 540 instructions says "If your deduction was limited under the federal law, enter an adjustment on line 8, column C for the amount over the federal limit.", but column C is empty despite the worksheet included in the return.

Is there a way to fix this or override manually?

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DaveF1006

What is your average balance you are using in the calculation? I also can't find a Line 8 column C in worksheet unless it is referring to a third loan.

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A

askzy1Author

Using 1.3M as average balance in calculation, federal return would allow 1/1.3 of total interest to be deductible, and supposedly California return would allow 1.1/1.3 of total interest to be deductible.

line 8 column C is part of CA form 540, mentioned in CA form 540 instructions in the link I posted. It says write the difference in column C which will add onto CA deductible.

The worksheet just calculated a higher deductible amount, but that amount or the difference isn’t used anywhere else in my return.

DaveF1006

Did you list equity debt in addition to your original loan debt? According to this State of California website, this deduction will allow deductions for home mortgage interest on mortgages up to $1 million plus up to $100,000 in equity debt. Do you have a second 1098 to report that is equity debt in addition to the 1098 for your original loan?

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