Form 1040 Schedule A is completed to report itemized deductions for U.S. taxpayers. Homeowners are generally entitled to a tax deduction for mortgage interest paid on their principal residence, however, limitations apply if the average balance of the outstanding mortgages is $750,000 or more during the year.

In this example, we have a taxpayer with a mortgage on his principal residence which exceeds those limits. So, he must calculate the reduced amount of deductible mortgage interest on Schedule A.

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