I get a negative # in the section for CA Mortgage and Home Equity Interest. Why? I itemized deductions on my federal but why am I being penalized on my state taxes?

Forum|Forum|6 years ago
February 2, 2020
7 replies
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Best answer by DMarkM1

I'm not sure which boxes you need from my 1098s but I have a total of $494,013.40 in outstanding mortgage principal between our originating loan and a HELOC (both pre the 2017 cut-off), $17,653.61 in paid interest, and a home value of $725,000. The federal and state limit shouldn't have anything to do with our issue here, given the home value amount. I redid the state again to try and get it to recognize the changes you mention in your follow-up message and still get a negative adjustment in the amount of -13,018.

Any thoughts?

And thank you for your messages. I didn't get a notice that there were new ones but I sincerely appreciate your time and will check in soon.

Remember this is no issue with CA, if you zeroize the box. CA law is less restrictive than Federal Law on this issue so a negative number is always wrong. No or "zero" adjustment works.

DMarkM1

Alumni - Intuit

If your mortgage debt loans originated on or after December 15th 2017 and exceed the CA limit of $1,000,000 then an adjustment is calculated to reduce the interest deduction for CA.

If your mortgage debt should not be over $1M, or should not be adjusted because it was taken out before Dec 15, 2017 then perhaps you have entered more than one form 1098, such as for a refinance. That may have incorrectly pushed your total mortgage debt to over $1M for CA and/or the origination date for a loan is now after the Dec 2017 date. Go back through your form 1098 entries in the federal "Deductions & Credits" tab to be sure you have entered correctly.

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emmapierceAuthor

Level 2

Thank you for your answer. Unfortunately, I'm still having a problem.

My mortgage debt is under $1M and both my primary loan and my HELOC were taken out before December 15th, 2017. I reviewed the information input in my federal return and all was correct, then I redid my state return from scratch but I still have this weird negative number in my California Mortgage and Home Equity Interest. It seems to happen when I input my home's Fair Market Value. Any follow up advice? Seems like a bad idea to just delete the adjustment but I don't want to be penalized for a system error.

DMarkM1

Alumni - Intuit

Interesting. Would you post the information from the boxes on your forms 1098? Also, since you mention it might be related to home's market value, let me know what you are putting for that and finally, what is the negative number you are getting for CA mortgage interest deduction. Thank you.

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DMarkM1

Alumni - Intuit

CA does not follow the federal rules for limiting the mortgage interest deduction, they are less restrictive than the federal government. Therefore, there should never be a negative number in that adjustment box. The number should be at worse blank, but could be positive, if the mortgage interest deduction was limited on your federal return and CA is giving you an additional tax break.

It appears an update has arrived for the CA forms. In the CA interview now you should get question in the "Income and adjustments" interview section asking you to input "end-of-year" mortgage balances. When you put zero in for ones paid off, the mortgage interest adjustment should correct.

You may also "Edit" the "Mortgage Interest Adjustment" item to get to the questions.

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