Outstanding Mortgage Principal

[Davidnnoah]

We paid off our home loan in 2021 so our "Outstanding Mortgage Principal" is $0   Turbotax rejects this entry after filling out the 1098 data. What to do?  Thanks.

[AmyC · Accepted solution]

The program wants your balance Jan 1, 2021 rather than Dec 31. Once you enter a number, the program will work to determine your allowed mortgage interest. No balance indicates no mortgage interest.

Related: Publication 936 (2021), Home Mortgage Interest Deduction - IRS

[wwatters6871]

I paid off my mortgage in 2020.  I still have a line of credit and received a Form 1098 with interest reported on line 1.  Turbo Tax is asking for an amount to be entered in line 2, even though the 1098 is showing $0.

[wwatters6871]

And, to further clarify, my line of credit balance also happened to be $0 on 1/1/2021.  I subsequently drew on the line and paid interest during the 2021 calendar year.

[RaifH]

You can report $1 as the Box 2 amount if TurboTax is giving you a hard time about $0 for your HELOC.

That said, unless the money you use from your line of credit is specifically used to buy, build, or improve the home that the line of credit is on, then all the debt is considered home equity debt which is not deductible. If that is the case, you do not need to include Form 1098 on your return at all. If you did use it for improvements to your home, then you can deduct the interest. In that case, go ahead and enter $1 as the outstanding mortgage principal and enter the following when TurboTax prompts you:

1. Answer Yes to Let's see if this is the most recent form for this loan.
2. Answer No to Is this the original loan used to buy your property? 
3. Answer Yes to Is this loan a HELOC or a refinance? 
4. Answer Yes to Did you take cash out?
5. Answer Have you used the money from this loan exclusively on this home?
6. If you answered No, enter the balance on January 1, 2022 and the amount of home acquisition debt in the proper fields. The home acquisition debt should be the amount used to improve your home.

@wwatters6871