Spoke to TT Support about this problem 3X yesterday.
In my tax situation, I sold one home/paid-off a mortgage in August and purchased another home/took out a new mortgage in October of 2020. The new mortgage was sold to another mortgage servicer in December. Thus, I have three 1098s but at no time did I have more than one mortgage loan. However, TT's mortgage interest deduction worksheet computes an average mortgage balance as if I had three mortgage loans (1 on the sold home, 1 on the new home, and 1 for the new servicer) for the full year!!
This is obviously incorrect, pushes me way over the $750,000 limitation that applies to deductibility of mortgage interest, and cannot be edited at all. In fact, you cannot even see the TT deductibility worksheet unless you view a pro forma copy of your federal tax return. TT is incorrectly limiting my interest deduction, and there's nothing I can do about it. So frustrating...
I did my own research and found a draft of IRS Publication 936 "Home Mortgage Interest Deduction", issued Nov-2020. Pub. 936 allows three methods of computing the average mortgage principal balance. Using all these methods, I computed my 2020 average mortgage balance to be well under the $750K limit that TT is applying to my situation. TT doesn't even give you the option to choose which of the IRS-approved methods to use.
The last Support Agent I spoke with told me (finally) that TT knows about this error and has an active Tech Support case to resolve it. However, the fix isn't expected until March 11, which is the date by which the IRS has "promised" to release its final version of Publication 936 for 2020. So, it seems the issue is partly an IRS delay (no surprise there) and partly an Intuit/TT problem. At a minimum, TT should provide a warning that final guidance on home mortgage interest deducibility is pending...and users should be careful about filing too early because the interest deduction may be incorrectly limited by the average balance error!
I am checking back on/about March 11 to see if the error is resolved, the average mortgage balance is correct at last, and I can take the full amount of my mortgage interest deduction. Users beware!!
