Form 8829 Mortgage Interest (State difference?)

I am sure I will soon feel silly for asking this question...

We use Lacerte. On the Form 8829 input, it has a field to enter the mortgage interest. Below that, it has a field to enter the State mortgage interest, if different.

Can somebody give me an example of when the State would be different?

Maybe I am wrong, but I thought the $750K or the $1 million limit only applies on the Sch A. On the 8829, you get to claim all acquisition/improvement interest.

For CA, mortgage interest on equity debt is allowed which for Federal it is not.

Have not read the instructions to see but that might be one of the differences being asked for.

Hmm... Can equity interest go on a Form 8829? In the olden days (pre 2018) I always made a point to exclude that. Figured it was the right thing to do since unrelated to purchase/improvement of residence.

No way would home equity interest for a non-acquisition indebtedness go to 8829.

Schedule A interest would differ between Fed & Cal, and any equity interest adjustment would get entered on Cal Sch CA, but for a deduction to show on 8829 it must be a traceable acquisition debt.

On the other hand, mortgage insurance is deductible for Fed as other (acquisition) mortgage interest and not deductible for Cal. I think this could be one example

Maria U. Ku, CPA
Oakland, CA

Wiles - went to the input line in Lacerte you asked about and then went to the Lacerte "Help" center for that line .
As I stated in my post above

"Have not read the instructions to see but that might be one of the differences being asked for."

Here is what I found

The entry generally applies to states that do not conform to the federal provision that limits the home mortgage interest deduction to a $750,000 / $375,000 debt limit on debt incurred after 12/15/2017. Such states are generally allowed to continue to use a $1,000,000 / $500,000 debt limit on all debt with the exception of home equity debt. At the federal level, interest attributable to home equity debt is generally no longer allowed (unless for business or investment), but for such states, the interest associated with up to $100,000 / $50,000 of home equity debt is still allowed as home mortgage interest.
Enter the indirect expenses in full (see the note below for exceptions). The program applies the business percentage and carries to Schedule A the nondeductible portion of interest, taxes, and casualty loss. If the taxpayer is filing two Forms 8829, you must prorate the applicable interest and taxes or adjust them through the Schedule A input section.

In the case of one home allocated to multiple businesses, entries in “Home office name or number entered first on Screen 29, if home used in more than one business” (Screen 29, Code 47) and “Percentage (.xx) of indirect expenses to apply to this business, if not 100%” (Screen 29, Code 512) can be used to apportion the indirect expenses. Square footage information and indirect expenses must be input in full on both business use of home entities.

Exception for Excess Home Mortgage Limitations: If the taxpayer is subject to excess home mortgage limitations, input fields are provided at the bottom of the Itemized Deductions input screen allowing you to enter loan information, including interest and points expense. If you are using that input section, you are also allowed to route the allowed interest and points expense from those loans to the 8829/Business Use of Home Worksheet. If you do this, do not make entries in the “Mortgage Interest [A]” (screen 29, code 111) or “Excess Mortgage Interest [A]” (screen 29, code 119) input fields in this screen.

Ah OK! Thank you.

So let's say the taxpayer has a $1 million (post 2017) acquisition debt with $40K of mortgage interest.

The Federal 8829 line 10 would show $30K due to the $750K limit, while the CA line 10 would show the full $40K.

Then on line 16 of the Form 8829, the Fed would show $10K and the CA would show $0.

In the end, the taxpayer gets a home office deduction based on the full $40K of mortgage interest for both Fed & CA. It's just a screwy forms presentation thing.

Here's another one in Lacerte - the Schedule E input

Lacerte has a separate input field for "State mortgage interest, if different"

Can anybody think of any example where a Schedule E would have a different deduction for mortgage interest for the State vs Fed?