The mortgage issue can be solved by realizing that when you get a new mortgage the old one will have been paid off.
- The mortgage that you had at the end of 2019, (1st mortgage) will have a principle balance of zero, because it was paid off to secure the 2nd.
- The second mortgage will also have a principal balance of zero. Because it was paid off to secure the 3rd mortgage.
- Finally, the mortgage you currently have (3rd mortgage) will reflect the principal as of 01/01/2021.
The IRS instructions for completing Form 1098 state that box 2 should be the amount of principal outstanding on the mortgage as of January 1, 2021. If the loan was no longer being serviced by that company, there would be no outstanding principal on that mortgage and the amount should be "0".
Entering '0' into box 2 in your tax return is the correct way to handle a loan that has been closed out.
To enter your 1098 Mortgage Interest statement.
- Log into TurboTax
- Select Deductions and Credits [Review/Edit]
- Mortgage Interest and Refinancing (Form 1098) [Edit/Add]
- Add a other 1098 or select your bank
- Continue to follow the interview
Note: if you enter your property taxes from your 1098 you will not have to enter them again in the property tax section.
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