I spent several hours on the phone with TurboTax last night, and it's a bug (that's been in place since 2019) and they aren't sure when they are going to fix it. They are calling me back tonight.
The problem is that it is ADDING all of your mortgages together, instead of averaginng them.
Say your original home loan was $400,000 when you refianced it. Then you refinanced for $450,000. Then you refinanced again (like we did) at a lower rate for $450,000. Your average should be something like $450,000, but instead TurboTax is adding together all your mortgages and it comes out to 1.3 million in mortgages. It isn't recognizing that you have paid it off. You can see these errors in the "form" view of Turbo Tax.
You can only get credit on the interest paid on $1,000,000, so anything over that is lopped off. Say you were supposed to get $15,000 interest credit on your $450,000 home, but if you look through the form view you will see it's actually limiting it to $9552 because of it beliving you have 1.3 million and lopping it off at the 1 million max.
I was wondering why my taxes were so high and it wasn't until I got to the "California" state version that it clearly stated my mortgage debt was 1.3 million so I went back and tried to figure out where this is going wrong. The error seems to come into play when you enter more than one refinanced mortgage. Turbo Tax is ignoring the "I paid this off" selection.
See the error on the forms:
Ded Home Mort
Tax & Int Wks
Home Int Wkst (you should have 3+ of these)
There are a lot of people experiencing this error but it hasn't been fixed. The earliest threads I see about it are from 2019.
