Deductions & credits

This issue has been resolved.  If the loan was sold rather than refinanced, it is important to be careful not to add the amounts together.  Since you have both situations, it requires care:

1. Enter you original 1098 that represented the original mortgage.
2. Enter your refinanced 1098's. if you have more than one, you may combine them.
3. In BOX 2 in the REFINANCEC 1098's put 0 as the mortgage principle balance. This represents the mortgage balance as of 12/31/2019 for that lender. Since the refinance took place in 2020, there was no beginning mortgage balance before the refinance thus this is 0.  

Entering the mortgage balance for the refinance will combine balances and put you over that $750K mortgage balance limitation and will limit your interest deduction.

The following are general instructions for entering multiple 1098 forms:

How do I handle multiple 1098 mortgage forms?

If you have multiple 1098 mortgage forms, you’ll enter them one at a time. After going through the steps with the first one, you can add a lender when you get to the Mortgage deduction summary screen. (In the case of a refinance, it's best to enter the 1098 from your original loan before the 1098 from your refinance.)

But, if they're both from the same lender, and one of them has the “Corrected” checkbox marked at the top, enter the corrected 1098 and discard or shred the other one.

What do I do if I have multiple 1098s from refinancing my home debt?

If your total home debt is under $375,000 ($250,000 for married filing separate) there is nothing new for you to do in 2020. Enter each 1098 as you normally would.

Home Debt Over $375,000

Under tax law, you are limited on the amount of home interest you can deduct. The limit is based on the loan amount and date of the origination of debt. We want to make sure we calculate this correctly for you. 

If you refinanced last year, you’ll have a Form 1098 from your previous lender and one from the lender you refinanced with. You’ll need both forms. 

Follow these steps to enter your mortgage information:

1. Gather all of your 1098 forms related to your refinance (the form from your original lender and the form from your new lender)
2. Grab a calculator and add together the box 1 amount from each form. Enter the total in TurboTax as Box 1 Mortgage interest.
3. Add the Box 5 amount from each form and enter the total as Box 5 Mortgage insurance premiums. (If you weren’t required to pay mortgage interest, these boxes will be blank on your forms and you won’t enter anything.)
4. Add the property tax paid from each form and enter it in the Property (real estate) taxes box.

Next, finish adding info for boxes 2, 3, 7, and 11 using Form 1098 for the original loan.

What if I have more than two 1098s?

You should combine all of the 1098s directly related to the refinance and enter it as one 1098.  An example of this is if you refinanced two loans into one loan. Any 1098s not directly related to the refinance should get entered separately.

This issue has been resolved.  If the loan was sold rather than refinanced, it is important to be careful not to add the amounts together.  Since you have both situations, it requires care.

1. Enter you original 1098 that represented the original mortgage.
2. Now enter your refinanced 1098's. if you have more than one, you may combine them.
3. Now the most important point, in BOX 2 in the 1098's regarding the refinance, put 0 as the mortgage principle balance. What many don't realize is that this represents the mortgage balance as of 12/31/2019 for that lender. Since the refinance took place in 2020, there was no beginning mortgage balance before the refinance thus this is 0.  
4. Entering the mortgage balance for the refinance will combine balances and put you over that $750K mortgage balance limitation and will limit your interest deduction.

@BrianneKN