Deductions & credits

Hi @ReneeM7122 , you seem to be the resident expert (or person posting most about this topic) so I figured I would pose my issue to you and get whatever advice you are able/willing to offer. 

I had 2 "loans" in 2020. 

Loan 1 - for a home (main) I sold in December of 2020. The loan originated before 2017 and was for less than $1MM. I received 1 1098 from this Bank (we'll call bank A)

Loan 2 - for a home (main) I purchased in August 2020. The loan originated in 2020 and was for more than $750k. Adding to the issue, Loan 2 was sold to another bank in 2020, so I received 2 1098s for this loan (from Bank B and C)

I have looked all over TT support and the "best practices" to deal with this have varied quite a bit. There also seems to be confusion on what exactly TT software can handle or not (as most of the solutions have been described as "workarounds"). 

I am using TT Premier desktop and interestingly found these knowledge kernels in the on-demand help which seem to address my questions specifically (see below). But I am hesitant to implement a "workaround" unless it is fully supported by TT as the only solution they have (or will have). Can you offer any help here or direct me to a person/team that can help solve this for good (for me and most likely lots of other TT users)?

What if I have multiple 1098s due to my lender selling my loan to another lender?
Lenders/Banks buying and selling your loan can be frustrating! It could also result in them sending you multiple 1098s for the same
mortgage. If this is applies to you combine the 1098s for the same loan to get the right deduction. Here's how:.
1. Gather all of your 1098 forms related to your mortgage. These are the forms from your original lender and your new lender.
2. Grab a calculator and add the Mortgage Interest Received (Box 1) amount from each form and enter the total in TurboTax as Box 1
Mortgage interest.
3. Add the box 5 Mortgage Insurance Premium from each form and enter the total as Box 5 Mortgage insurance premiums. (If you weren't
required to pay mortgage insurance premiums, these boxes will be blank on your forms and you won't enter anything here.)
4. Add the property tax paid from each form and enter it here next to Property (real estate) taxes paid.
5. Enter the remaining items from the 1098 loan that was paid off in 2020 for the Outstanding Mortgage Principal (Box 2), Mortgage
Origination Date (Box 3), and the checkbox on box 7 (address of property securing the mortgage)
Once you're done here, hold on to your forms for when we ask about any points you paid when you refinanced. Points are a fee you pay
to reduce your loan's interest rate. If you paid points, you'll see an amount in box 6 of the 1098 for your refinance.

What if I had a mortgage larger than $750,000 at any time during 2020 with the sale of a home?
Mortgage interest is limited once your loan exceeds $750,000 for a home purchased in 2020. Your old home may qualify up to a
$1,000,000 limit if the home debt originated before December 16, 2017. The $1,000,000 limit is based on when the debt originated and
funds were used to buy, build or improve the home. (refer to IRS Publication 936 for details)
We will walk you through how to do this. Follow these steps.
Input each 1098 separately with the following modifications:
1. Mortgage Interest Received (Box 1) - manually adjust the interest to reflect the interest limit (see step below)
2. Outstanding Mortgage Principal (Box 2) - Enter $0 for Outstanding Mortgage Principal
Manually Calculating Interest:
1. Calculate the average loan size for the old and new home
Find the balance of each loan at the beginning of the year and at the end (either the end of the year or end of the loan)
Beginning Balances -The beginning balance of each loan is on the 1098 on Box 2- Outstanding Mortgage Principal.
Ending Balances- Ending balances would be the payoff amount on your old home (payoff statement or escrow statement) and on the
ending balance on the new home would be found on the January 2021 Mortgage Statement.
Average for each loan would be=
(Beginning balance + Ending Balance)/2
2. Calculate the portion of the interest paid that is deductible depending on when your home was purchased as follows:
Home Bought/Debt originating before December 16, 2017= $1,000,000/ Average Loan amount
Home Bought/Debt originating after December 16, 2017= $750,000/ Average Loan amount
Calculate the deductible amount of Interest-Take the percentage and times that by the actual interest paid as reflected on the 1098. Enter
this amount in Mortgage Interest Received (Box 1).
If you are under the maximum loan limit on a home do not take more than 100% of interest on the 1098.
Example-Over the Loan Limit in the Sale and Purchase Home
Old Home- on January 1, 2020 the old home had mortgage debt of $1,200,000. When the home was sold the amount outstanding on the
loan was $1,100,000 and interest and the total interest paid on it in 202 was $36,000.
New home - Mortgage of $1,000,000 with $10,000 of interest paid. The new loan balance was at $950,000 at the end of the year.
Old Home
Calculate the average balance - (1,200,000 +1,100,000)/2= $1,150,000
Calculate the percentage to deduct- 1,000,000/ Old Home Average of $1,150,000 =.87
Calculate the deductible amount of Interest to Deduct-Interest Paid of $36,000 *.87 = $31,320 (Report on Box 1 on the 1098)
New Home
Calculate the average balance ($1,000,000 + $950,000) /2 =$975,000
Calculate the percentage to deduct- $750,000/ $975,000=.77
Calculate the deductible amount of Interest-Interest paid on new home of $10,000 x .77 = $7,700 (Report on Box 1 of the Second 1098)
Box 2. Outstanding Mortgage Principal - enter $0
Enter the values from the rest of the boxes as you normally would.
Total Amount of Interest Deducted on your Tax Return =$39,020
Example - Over the Loan Limit on Just One Home
Old Home- on January 1, 2020 the old home had mortgage debt of $600,000. When the home was sold the amount outstanding on the
loan was $575,000 and interest and the total interest paid on it in 202 was $18,000.
New home - Mortgage of $800,000 with $10,000 of interest paid. The new loan balance was at $775,000 at the end of the year.
Old Home
Calculate the average balance - ($600,000+$575,000)/2 = $587,500
Calculate the percentage to deduct -1,000,000/ Old Home Average of $587,500 = 1 (do not go over 1 or 100%)
Calculate the deductible amount of Interest - $18,000 * 1 = $18,000 (Report on Box 1 on the 1098)
Deductible Interest =$18,000 (Enter for Interest on Box 1 on 1098 for new home)
New Home- $750,000 limit
Calculate the average balance - ($800,000+$775,000)/2 = $787,500
Calculate the percentage to deduct -750,000/ Old Home Average of $787,500 = .95 (do not go over 1 or 100%)
Calculate the deductible amount of Interest - $10,000 *.95 = $9,500 (Report on Box 1 on the 1098)
Deductible Interest =$9,500 (Enter for Interest on Box 1 on 1098 for new home)
Box 2- Make sure you enter $0 on each 1098.
Total Amount of Interest Deducted on your Tax Return =$27,500