Mortgage Interest Deduction – Two Homes, when both mortgages are acquisition debt secured by two different qualified residences:

Which method is correct under IRS rules?

A) Combine both loans and apply the $375,000 limit per spouse across the total average mortgage balance, then apply the cap to total interest.
OR
B) Treat each mortgage separately, applying the $375,000 limit to each loan individually, then sum the deductible interest from both.

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