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Christine G
Returning Member

1098 Interest Limitations

I have two 1098 forms.  One for a coop on which the loan originated in 2016 and the balance is now $37943 in 2022 and the interest amount is $1420.  I get a 1098 for my share of this loan. The other loan is when I purchased a unit in this coop in July 2021 for $750,000 and my interest amount for 2022 is around $24,000.  My questions are:

Isn't the $1420 on the coop loan fully deductible since it has an original loan date that was in 2016 and falls under the $1M loan limit? The other $750,000 loan is after the December 2017 so it is limited to interest on the $750,000 amount but wouldn't the interest on this $750,000 loan be fully deductible since I am under the $750,000 limit?  

The turbo tax software seems to be adding both loans for a total of $787,943 and limiting it to the $750,000 so it is reducing the interest to a percentage when dividing $750,000 limitation by $787,943.

Wouldn't I be able to deduct the total interest from my 1098's of $1420 and $24,000?

If so, how would I enter into Turbo Tax to be able to get the full interest deductions and reduced limits?

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6 Replies
Christine G
Returning Member

1098 Interest Limitations

I may have a solution to this problem.  Why don't I not include the outstanding loan balance in Turbo tax for the coop loan since it is not my personal loan but the coop's loan but I can still deduct the interest on the loan since I paid it.  Then my only loan outstanding will be my personal mortgage loan of $750,000 which will be right at the limit for full interest deduction.

Wouldn't this be a correct solution?

RobertB4444
Employee Tax Expert

1098 Interest Limitations

Because the co-op loan originated in 2016 this will solve the problem for you.

 

@Christine G 

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1098 Interest Limitations

I have a similar situation, but my 2nd property isn't a co-op.  it's just a secondary house.

Primary house i bought in 2021 has $1M left as principal, so I can only deduct $750,000 worth of interest for this property.

I have a secondary house I bought in 2015, which has $500,000 as principal.  I refinanced it in 2020 for the same amount of principal (not a cash out).  

So I should be able to also deduct $250,000 worth of mortgage interest for the secondary house right? 

$1M (before 2017 secondary house)  minus $750,000 (2021 primary house) = $250,000

 

The turbotax software is limiting it to just the $750,000 for the primary house.

Christine G
Returning Member

1098 Interest Limitations

Do I have to include the outstanding loan balance of $30+ from the coop 1098 since this is not my personal loan but the coop's? However I am allowed to deduct the interest and taxes from this coop 1098.  Or is this coop mortgage considered mine also?  Just need to know the correct way of reporting this outstanding loan because if I add this coop loan to my loan balance, then I will go over the $750,000 interest limit deduction of my personal mortgage loan and cannot fully deduct all my interest I paid.

DianeW777
Employee Tax Expert

1098 Interest Limitations

By using the worksheets in the IRS publication below, you may need some manual calculations to be sure you are able to deduct your maximum mortgage interest allowed. Your  situation is somewhat complicated so this action is going to make it easier to complete your tax return.  Keep all of your calculations and notes with your tax return so that you can provide the documentation you need should the IRS send any question.

Once the worksheets are completed you can enter the correct deductible mortgage interest in one 1098.  Keep all the information with your tax return.

  • Search (upper right) > type 1098 > Click the Jump to... link > Delete one of the forms  and Edit the most recent mortgage interest entry.

@dubbytaxes 

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Cynthiad66
Expert Alumni

1098 Interest Limitations

No you do not have to list the Co-op mortgage interest balance unless that $30,000+ is your share of the balance of the loan.

 

If your mortgage interest total is more than $750,000 here is an example of how to calculate.

 

For example, say your mortgage is $1.25 million. Since the limit is $750,000, divide $750,000 by $1.25 million to get 0.6. Then, if you paid $80,000 in interest for the year, multiply $80,000 by 0.6 to find you can deduct $48,000.

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