@Cynthiad66
Please stop suggesting this. You are going to cause erroneous returns.
I have, just 8 posts above, explained in detail why this is not an exact solution (and tagged you in the reply). At this point I can only see this as willful ignorance.
A case example of why this error suppression strategy can prove problematic:
loan 1: $700k, held until June 2020
loan 2 (refinance): taken out on July 1 2020, $900k including cash taken out for home renovation or other reasons
What you are suggesting is to ignore the 1098 line 2 for mortgage 2 and to report the entirety of mortgage interest as deductible. However, the actual average mortgage balance for the year 2020 is (700k + 900k)/2 = $800k. Of this, only $750k is eligible for a deduction. Thus, the actual mortgage interest paid needs to be multiplied by 0.9375 in order to calculate the deductible interest. Your method would have the filer illegally claim a larger deduction than they are entitled to. Alternatively, if 1098 line 2 for mortgage 1 were ignored instead, then the filer would lose out on the mortgage interest from $50k of debt. If mortgage 2 happened to be smaller than mortgage 1 (for example if additional principal was paid at closing), then the errors would be reversed but remain present. Another issue is that your strategy completely ignores the mortgage origination dates, which has implications also. Loans taken out before 2017 are deductible to $1M loan balance - by "zero-ing" out line 2 of the original 1098 TurboTax will apply the lower ($750k) limit even to acquisition debt subject to the $1M limit and thereby lose filers deductions.
My point is that these "solutions" are appropriate only for those filers sophisticated enough to understand the underlying rules. The kinds of people most likely to blindly take this advice, however, are unlikely to read IRS guidance documents. As we all know, ignorance is no defense in an audit. TT needs to formally address this calculation issue.
Having read and thought about this issue more than I ever wanted to, my best advice to people in this situation (pending a proper fix) is to create and enter a "hybrid" 1098 which incorporates the average loan balance, the original origination date, and the totality of mortgage interest paid. This 1098 is never sent to the IRS so, while not ideal, should generate the right numbers. However this depends on carefully reviewing the rules for refinanced debt and ensuring your refinance does not run afoul of any of the rules regarding deductibility (for example if you took cash out for any reason).
@Bostondoc84
Some TurboTax customers are experiencing an issue with their home mortgage average balance. This can cause the home mortgage interest to be incorrectly limited. This may be affecting your tax return.
Please sign up for email notifications when an update related to this issue is available here.
See also this TurboTax Help.
[edited 2/9/21 | 3:24 pst]
