When entering the 1098s for the mortgage paid and the new mortgage you need to eliminate the Outstanding Mortgage Principal on the loan that was paid off. To enter the two 1098s follow these steps:
- Enter the first 1098 for the loan that was paid off. In Box 1 enter the amount of interest;
- For Outstanding Mortgage Principal leave it blank or enter "0" and
- Enter the Origination Date.
For the second 1098,
- Enter the Box 1 amount;
- For Outstanding Mortgage Principal enter the amount as shown on the second 1098 (new mortgage)
- Enter the Origination Date
This will eliminate the average of the Outstanding Mortgage Principal.
If this is a re-fi, you could combine the amount in Box 1 of both 1098s, then for the Outstanding Mortgage Principal use the amount from the second (re-fi) 1098 only.
