My Workaround.
**I am not a tax professional. My approach seems logical but I am not a tax expert.**
Issue – I refinanced my mortgage in November and turbo tax calculated my mortgage interest deduction based on the wrong average balances for my initial and refinanced loans.
What happened –
My initial loan balance in January was ~$307K and it was ~$289K in November when I refinanced my loan. Turbo Tax calculated my average balance to be ~$298K, but it really should have been ~$274K.
For my new, refinanced loan (which was effective in December for ~$312K), turbo tax calculated my average balance to be ~$312K, but it really should have been ~26K. Table below captures my approach to reaching that conclusion.
| Initial Loan
Balance | Refinanced Loan
Balance |
January | $307,424.65 | $0.00 |
February | $305,826.44 | $0.00 |
March | $304,223.57 | $0.00 |
April | $302,616.02 | $0.00 |
May | $301,003.78 | $0.00 |
June | $299,386.84 | $0.00 |
July | $297,765.19 | $0.00 |
August | $296,140.75 | $0.00 |
September | $294,511.57 | $0.00 |
October | $292,877.64 | $0.00 |
November | $289,625.46 | $0.00 |
December | $0.00 | $312,040.00 |
| | |
Average Balance | $274,283.49 | $26,003.33 |
To correct the average balance error, I manually changed the calculations that turbo tax derived and I entered the values that I calculated above. To do this I entered the “Forms” view (Click "View" from the Header Menu, next to "File" and "Edit", and then click "Forms").
Once in the “Forms” view I selected the “Deductible Home Mortgage Interest Worksheet”. I right clicked on the Months loan outstanding and selected override to change my initial loan value from 12 to 11 months and my new loan value to 1 month.
I then right clicked on the average balances and selected override to enter the average balance numbers shown in the table above.
The impact of these changes propagated through most of my other worksheets, but my Schedule A line 8A was still not correct. I had to override line A2 on the “Tax and Interest Deduction Worksheet” with the value found on line 16 of the “Deductible Home Mortgage Interest Worksheet” to correct the issue on Schedule A line 8A.
If you have a similar problem and you can’t wait for TurboTax to correct this issue, then I hope this helps you out.
As a reminder, “I AM NOT A TAX PROFESSIONAL, but the math makes sense to me.”
