Deductions & credits

RaifH · ‎April 2, 2022

1. For Lender name, I would use the most recent lender. Origination date I would use the closing date. I would not worry about clicking the interest amount is different box. Mark this as the most recent loan.

In all honesty, it's not important, because, in the end, the IRS only gets one number, your deductible mortgage interest. Everything else is collected in the background to fill out worksheets and forms for your records to come up with that one number. The important thing is to remember what you are doing so that in the event the IRS does question the deductible mortgage interest number, you remember what you did to come up with that number. The worksheets in the background will show how it determined the amount of deductible interest from the outstanding mortgage balance that you provide (which I'll get to), but it won't show how you calculated that amount.

For box 2 for each loan, you will want to calculate it in this way: Take the reported amount in Box 2 for each loan, multiply it by the number of months you had that loan and divide it by 12. For example, if you refinanced in April, you would multiply the Box 2 amount for the original loan and the HELOC by 4 then divide it by 12. You would multiply the refinance by 9 before dividing it by 12. This reduces the average mortgage balance using the IRS method of determining the average by the monthly average rather than the method that TurboTax uses by default, which is taking the average of the beginning and ending balances. Reporting a lower balance allows more of your interest to be deductible.

To enter all this in TurboTax:

Original loan
1. In the Federal > Deductions & Credits section of your return, scroll down to Your Home and click Revisit/Start next to Mortgage Interest and Refinancing (Form 1098)
2. Enter Form 1098 for the original loan:
  1. Box 1 Mortgage interest - As reported
  2. Box 2 Outstanding Mortgage Principal - See above
  3. Box 3 Mortgage Origination Date - Use the date reported
  4. Enter the rest of the information as it appears.
3. Answer What kind of property is this loan secured by?
4. Answer Yes or No to We didn't pay any points.
5. Answer No to Let's see if this is the most recent form for this loan.
6. Answer Yes to Is this the original loan used to buy your property?
HELOC
1. In the Federal > Deductions & Credits section of your return, scroll down to Your Home and click Revisit/Start next to Mortgage Interest and Refinancing (Form 1098)
2. Enter the 1098 for this loan:
  1. Box 1 Mortgage interest - As reported
  2. Box 2 Outstanding Mortgage Principal - See above
  3. Box 3 Mortgage Origination Date - Use the date on Form 1098
  4. Boxes 5 & 6 - Use the combined totals from both 1098s
  5. Make sure Box 7 is checked
3. Answer What kind of property is this loan secured by?
4. Answer Yes or No to We didn't pay any points.
5. Answer No to Let's see if this is the most recent form for this loan.
6. Answer No to Is this the original loan used to buy your property?
7. Answer Yes to Is this loan a HELOC or a refinance?
8. Answer Yes to Did you take cash out?
9. Answer Yes to Have you used the money from this loan exclusively on this home?
Refinance
1. In the Federal > Deductions & Credits section of your return, scroll down to Your Home and click Revisit/Start next to Mortgage Interest and Refinancing (Form 1098)
2. Answer the questions and enter the information from your Form 1098s:
  1. Box 1 Mortgage interest - Add the amounts together from all three 1098s
  2. Box 2 Outstanding Mortgage Principal - See above
  3. Box 3 Mortgage Origination Date - Use the closing date of this loan
  4. Boxes 5 & 6 - Use the combined totals from all three 1098s
  5. Make sure Box 7 is checked
3. Answer What kind of property is this loan secured by?
4. Answer This is a new loan on which I paid points in 2021 to Tell us about any points.
5. Enter the information regarding the new loan and the points paid. These will be amortized over the life of the loan. You do not need to click the box that says This loan was paid off.
6. Answer Yes to Let's see if this is the most recent form for this loan.
7. Answer No to Is this the original loan used to buy your property?
8. Answer Yes to Is this loan a HELOC or a refinance?
9. Answer No to Did you take cash out?
10. Once you are back in the Home loan deduction summary screen, click Done.
11. Enter the original purchase date of the property for each loan (it should be the same for all 3)
12. Answer Do either of these apply to this loan? If the home was originally purchased prior to December 15, 2017, a higher mortgage limit applies to your home acquisition debt.
13. Enter the outstanding loan balance you calculated for the amount on January 1, 2022 in the first field for each loan. Leave the second field blank for the final loan. For the first two, enter the date that you refinanced