Hello,
I have a case where a client had two primary residences in the same year (of course, not at the same time). First property with mortgage balance of approx. 500k was converted to rental end of May and the new primary residence was purchased on June 1st with a mortgage over 1 million (1.2M). The question is how to determine the deductible interest. In my opinion, the interest on the mortgage for the first part of the year should be fully deductible (while the property was used as a primary residence) as the mortgage was below 1M. And the second mortgage should be averaged as it is explained in the Pub 935 (value as of June 1st and Dec 31st added up, then divided by 2). And, finally, the interest paid on that second mortgage (for the last 7 months of the year) would be prorated with 1 million rule in mind. Of course, the remaining part of the interest for the converted property goes to Schedule E. Am I thinking this correctly?