topic Mortgage interest deduction issues in Deductions & credits

Mortgage interest deduction issues

primus1981 — Sun, 28 Feb 2021 17:45:02 GMT

I am having 2 issues regarding the mortgage interest deduction that I could use some clarification on.

1. We have a mortgage originated in 2016 for over $1,000,000. I understand that the mortgage interest is deductible up to the first $1,000,000 of debt. The TurboTax instructions say to follow the IRS 936 guidelines and enter the adjusted interest, which for us is around 70% of the actual interested we paid. However, when I do so, TurboTax ends up deducting ~70% of the already adjusted value. If I enter in the full amount of interest paid, TurboTax says our deductible interest is around 70% of the full amount, which is what I expect. Is TurboTax performing the adjustment automatically? Are the instructions simply incorrect/misleading?

2. I later encounter a screen for the CA mortgage interest adjustment. Since our loan originated in 2016 (prior to the 2017 transition to a $750,000 limit), we are still subject to the older $1,000,000 limit. As such, I didn't think we would qualify for the mortgage interest adjustment. However, TurboTax says that we are allowed a $3,000 adjustment. Is that correct?

Thanks for any help. Sorry for the long questions.

Re: Mortgage interest deduction issues

primus1981 — Sun, 28 Feb 2021 19:02:36 GMT

1. I printed out the resulting forms and confirmed that TurboTax is automatically computing the correct limited deduction. The Schedule A and Deductible Home Mortgage Interest Worksheet have the expected values and calculations. I think the instructions were misleading.

2. Comparing the Schedule A Deductible Home Mortgage Interest Worksheet and the CA 540/540NR Deductible Home Mortgage Interest Worksheet, it appears that the $3,000 difference is due to an additional $100,000 allowed for home equity debt that raises the qualified loan limit to $1,100,000, compared to the federal limit of $1,000,000.

Re: Mortgage interest deduction issues

mawine49 — Tue, 02 Mar 2021 01:16:34 GMT

My interest for this past year on an existing balance of under $230,000 is $7396. This amount I entered, but does not show as a deduction on the final calculation where last year I was allowed the deduction of $8611.

Re: Mortgage interest deduction issues

mawine49 — Tue, 02 Mar 2021 01:41:35 GMT

waiting on response to query why I am not getting a mortgage interest deduction.

Re: Mortgage interest deduction issues

mawine49 — Tue, 02 Mar 2021 02:01:13 GMT

still waiting for query why I am not getting mortgage interest deduction.

Re: Mortgage interest deduction issues

mawine49 — Tue, 02 Mar 2021 03:21:15 GMT

Is any boy there

Re: Mortgage interest deduction issues

Cynthiad66 — Thu, 04 Mar 2021 19:34:16 GMT

There is a known problem with Home Mortgage Deduction. TurboTax is working to fix the problem and the many other issues. There are many changes due to the CARES Act that require software upgrades. We have not been given an expected date for the fix yet. Please check back often to see if you can file your return.

In the meantime, you can try this work around. You did not provide the details of your Mortgage situation and therefore I am giving you a general work around that might help. Please try this.

If there is a refi and there was an outstanding mortgage principal listed in both of them on Line 2 on the 1098. When you do put an outstanding balance in both forms, then the program adds them together and if that number is greater than $750k, then it puts you in the category to "limit interest". To get that to go away, you need to go back to the deductions section and click on "edit" mortgage interest statement. Change the line 2 of the mortgage that you no longer owe on (like the one that you refinanced and paid off) to a 0 (zero) because you have refinanced out of that loan and no longer have an "outstanding mortgage principal". Once you change one of them to zero (the one that was paid off by the refinance) then it should no longer pop up with that error at the end when you go to file.

Re: Mortgage interest deduction issues

ely6101 — Mon, 08 Mar 2021 21:12:15 GMT

Will the fix be an automatic update to the software? I am having similar issues. $8426 in interest paid that has always been deductible does not calculate as the deduction being taken. Any idea when the update will go through?

Re: Mortgage interest deduction issues

JamesG1 — Mon, 08 Mar 2021 21:48:02 GMT

TurboTax Online is updated automatically. In TurboTax Desktop versions, click Online / Check for updates in the upper left hand corner of the screen.

Please sign up for email notifications when an update related to this issue is available. See this TurboTax Help.

How many 1098's and how many properties are you reporting? See this TurboTax Help.

Also, perhaps this will be helpful.

In TurboTax Online Deluxe, I was able to enter a home loan on an IRS form 1098 and the second IRS form 1098 for the refinanced loan. For the refinanced loan, I used the balance of the loan at the time of loan pay-off.

I was given the full mortgage interest deduction and the Home Mortgage Interest Limitation Worksheet did not add the two mortgage balances together.

The entries were made at Federal / Deductions & Credits / Mortgage Interest (Form 1098).

Entries for the original loan

Do any of these uncommon situations, I entered None of these apply.

Did you pay points, I entered I’ve already deducted.

Was this loan paid off or refinanced, I entered Yes.

Is this loan a home equity, I entered No, this is the original loan.

Entries for the second loan

Do any of these uncommon situations, I entered None of these apply.

Did you pay points, I entered I didn’t pay points.

Was this loan paid off or refinanced, I entered No.

Is this loan a home equity, I entered Yes, this is a loan I’ve refinanced.

So what type of loan is it? I entered A mortgage loan that I’ve refinanced.

Have you ever pulled cash? I entered No.

Re: Mortgage interest deduction issues

LRSCRS1 — Sun, 21 Mar 2021 19:11:21 GMT

I understand that Turbo Tax software is not working correctly for mortgage interest deduction.

I am among your customers wherein your software is NOT properly calculating my mortgage interest.

Rather it is significantly under reporting the proper amount for Itemization.

When will this software error be fixed????

Rather than seeing your tv commercials for expert help and Free Free Free, how about fixing the problem and help me who paid for your software.

Re: Mortgage interest deduction issues

KATHY71 — Tue, 13 Apr 2021 23:44:50 GMT

I REFINANCED LAST YEAR AND HAVE INTEREST TOTALS FOR BOTH VENDORS

PNC BANK $3,581.06 AND THE MONEY SOURCE INC $5409.54 A TOTAL OF $8990.60. WHEN MY RETURN WAS PROCESSED IT ONLY PICKED UP $3581.06, HOW DO I FIX THIS?

Re: Mortgage interest deduction issues

KATHY71 — Tue, 13 Apr 2021 23:47:09 GMT

WHEN I WENT THRU THE STEPS FOR THE INTEREST I ENTERED BOTH MORTGAGE INTEREST AND IT ONLY PICKED UP PNC BANK FOR 3,581.00 SHOULD I JUST PUT THE TOTAL FOR BOTH

Re: Mortgage interest deduction issues

DaveF1006 — Wed, 14 Apr 2021 01:06:15 GMT

Yes, put in the total for both.

Re: Mortgage interest deduction issues

jd5504 — Wed, 21 Apr 2021 21:45:27 GMT

mortgage interest does not lower federal tax

Re: Mortgage interest deduction issues

JotikaT2 — Wed, 21 Apr 2021 22:20:49 GMT

If the total amount of your mortgage balance exceeds $750,000, then the amount might be limited.

Mortgage interest deduction limits

Or are you able to itemize your deductions or is your return being calculated using the standard deduction?

Standard deduction versus Itemized deduction

Standard deduction for 2020

To determine what deduction is being used on your return, log back into TurboTax.

Go back to your Deductions & Credits Screen.
Scroll down to the bottom and select Wrap up Tax Breaks.
You should continue through the screens until you see the following screen:

TurboTax will use the deduction that yields the highest tax benefit for you.

@jd5504

Re: Mortgage interest deduction issues

jd5504 — Wed, 21 Apr 2021 23:45:43 GMT

My home interest and charitable deductions do not lessen my federal tax amount

Re: Mortgage interest deduction issues

DaveF1006 — Fri, 23 Apr 2021 02:49:11 GMT

You may have enough deductions to be able to itemized thus receiving the standard deduction. The second possibility is that you may have reduced your taxable income to zero with all of your itemized deductions. To see if you are receiving the standard deduction or itemize deductions:

Log into Turbo Tax
Go to federal>deductions and credits
Scroll through the screens until you get to the screenshot shown below. If it says you are receiving the standard deduction, you did not have enough deductions to itemize. If it says you are receiving itemized deductions, then your itemized deductions exceeded your standard deduction.

Re: Mortgage interest deduction issues

tzim6971 — Mon, 26 Apr 2021 18:19:57 GMT

I just realized that the mortgage interest wasn't calculated and I submitted my return. Now what? wait until you fix the bug and then file an amendment? Since I owed (without the mortgage interest) will the IRS now refund my payment?

Re: Mortgage interest deduction issues

DaveF1006 — Wed, 28 Apr 2021 01:49:41 GMT

Yes, you can file your amendment now.I would suggest you contact a live support agent to assist you in entering the information in correctly. Please use this link to Contact Us to contact live help.

Once your amendment is filed, you should see a refund on your amended return.

Re: Mortgage interest deduction issues

sokwong — Sat, 01 May 2021 21:19:24 GMT

I tried the method you mentioned below by "change my deduction" and TurboTax does not allow the mortgage interest deduction that was paid. The house balance is below the threshold of $750,000. It only picks up the state and local taxes (state income tax) that was paid but did not not allow the mortgage interest deduction or property tax paid. The correct total itemized deduction should be $21,840.10 but TurboTax is only allowing $10,500. Therefore, recommending the standard deduction of $18,650.

I paid for the TurboTax Deluxe software and did not expect this problem to persist.