I think I’m starting to understand what’s happening 🙂
When I entered the first 1098, for the question “Is this 1098 the most recent for your loan?”, I answered “No”, as advised in this TurboTax article.
Before entering the second 1098, I downloaded the return, including the worksheets, to see what was happening.
In Schedule A, line 10, I saw the full mortgage interest amount - about $72K - which matches what I paid per my first 1098.
Then, I entered the second 1098 in addition to the first one. This time, I answered “Yes” to the “Is this 1098 the most recent for your loan?” question.
After downloading the return again, with both 1098s included, the mortgage interest amount in Schedule A, line 10 was now $48K - less than the $72K I originally saw.
I paid about $75K in total mortgage interest across both 1098s. However, because my loan amount is $1,150K, which exceeds the $750K IRS limit, the deductible mortgage interest is:
750/1150 * 75K = $48K
So, when I initially entered just the first 1098 and marked it as not the most recent, TurboTax did not adjust the deductible mortgage interest - even though my loan principal exceeded $750K. That explains why my refund initially appeared higher with only the first 1098.
Does that make sense?
