topic Adding more interest expense in Deductions & credits

Adding more interest expense

jyeh74 — Tue, 10 Feb 2026 10:42:47 GMT

I understand that interest (1098) is limited based on when you took out your loan as well as the amount of the loan. If I enter more 1098 to my primary home, how can my total refund reduce? It should at least stay the same and the system just not allow any more interest deductions. But I noticed adding another interest deduction reduced the refund. That does not make any sense.

Re: Adding more interest expense

JulieS — Mon, 26 Feb 2024 17:38:09 GMT

Yes, in general adding additional tax deductions usually increases a refund, or doesn't change it.

First of all, please doublecheck to make sure that is a refund and not a balance due showing.

If your additional deductions are tax preference items, they may increase your tax if they are triggering Alternative Minimum Tax (AMT).

For AMT, only home acquisition debt is deductible. Unlike the general rules, you can't deduct older home equity debt from before 2018. Follow this link for more about AMT.

Re: Adding more interest expense

jyeh74 — Mon, 26 Feb 2024 18:28:19 GMT

@JulieS I only had 1098 for primary. It showed a refund. Then I added 1098 for HELOC on primary.

This is a weird phenomenon. I have two 1098.

Primary = $10k interest, Heloc = $2k interest

I get a refund.

If I delete both out, and first add the Heloc = $2k interest, then add the primary = $10k interest, it will give me a lesser refund.

If I delete both out, and first add the primary = $10k interest, then add the Heloc = $2k interest, it will give me a higher refund.

I am not changing the information. Just the order in which it is entered under Deductions and Credits under Your Home. Why is this happening?

Re: Adding more interest expense

MarilynG1 — Mon, 26 Feb 2024 18:50:56 GMT

It shouldn't make a difference in what order you enter your 1098's for Mortgage Interest. However, make sure for the HELOC, that you indicate it is a HELOC, and what amount of the proceeds was used on the home.

Sometimes the Refund Meter is strange, so if you are seeing these results immediately after your entries, keep going through your return items, the number may change again, possibly when you finish the Deductions & Credits section, and move to the next section.

Here's more info on Deducting Mortgage Interest.

@jyeh74

Re: Adding more interest expense

jyeh74 — Mon, 26 Feb 2024 18:53:28 GMT

@MarilynG1 Yes, Heloc was entered as Heloc. Although nothing changes even if you select another answer like "none of these". The sequence on how it is entered makes a difference for me. Not sure why. I went through the end.

Re: Adding more interest expense

MarilynG1 — Mon, 26 Feb 2024 19:04:03 GMT

Since we can't see your return in this forum, you may want to Contact TurboTax Support for more help.

In cases where you have two 1098's and one is for a Refinance, or one is for a second home, should issues with loan balances changing refund amounts arise.

This should not apply in your case, though.

Just in general, if you're using TurboTax Online, close the program, and clear your Cache and Cookies.

Make sure you don't have any other programs running in the background (like Email). Try a different browser.

@jyeh74

Re: Adding more interest expense

jyeh74 — Mon, 26 Feb 2024 19:11:07 GMT

@MarilynG1 ill call but this is installed version on computer not online version.

Re: Adding more interest expense

MarilynG1 — Mon, 26 Feb 2024 19:17:23 GMT

Understand, but the installed version also goes Online for various reasons (updates, help, etc.) so it can also be affected by computer/internet issues.

If you can't get resolution (tech support is able to access your computer), let us know and we'll try to help further.

@jyeh74

Re: Adding more interest expense

jyeh74 — Mon, 26 Feb 2024 20:22:16 GMT

@MarilynG1
I just spent some time on the phone with TurboTax support and they were unable to resolve. They said the sequence should not matter on total refund. It should be the same

@JulieS when I add the Heloc 1098 in box 1, refund will increase. However, when I go to smart check, it asks for outstanding mortgage principal. The Heloc 1098 doesn't state the outstanding mortgage principal. Weird, because my primary 1098 has it in box 2 but the Heloc 1098 does not. The Heloc was taking out later in July, 2023. So there was technically no principal balance in the beginning of 2023. Is it asking for original Heloc amount taken later in July, or what the outstanding mortgage principal was as of Jan 1, 2023?

If its asking for the later, the outstanding mortgage principal as of Jan 1, 2023 = 0, then refund will increase. If enter the amount of the Heloc balance that was taken out, then the refund will decrease.

Re: Adding more interest expense

PatriciaV — Tue, 27 Feb 2024 18:46:49 GMT

Look closely at the Smart Check question to identify which 1098 it's asking about. If a sub-form appears, you may need to scroll to the top to identify the 1098 in question.

For the original mortgage, enter the outstanding principal as of January 1 of the current year (ie: 1/1/24 when preparing a tax year 2023 return).

Since the HELOC was taken out mid-year, enter the mortgage principal as of the date of origination.

Look closely at the Smart Check question to identify which 1098 it's asking about.

@jyeh74

Re: Adding more interest expense

jyeh74 — Tue, 27 Feb 2024 18:50:45 GMT

So if I am doing 2023 taxes, you look at the principal balance of 1/1/24 (this year) or 1/1/23 (current year)?

Re: Adding more interest expense

DawnC — Tue, 27 Feb 2024 19:06:35 GMT

You should enter the balance of your HELOC principal balance as of 01/01/2023. This amount will get added to the principal amount of your mortgage and is used to make sure you are within the $750K limit. See Deducting HELOC Interest

In most cases, you can deduct your interest. How much you can deduct depends on the date of the loan, the amount of the loan, and how you use the loan proceeds.

To get the full deduction, your mortgage debt doesn’t exceed $1 million ($500,000 if Married Filing Separately) if you got your loan between October 13, 1987, and December 15, 2017, or $750,000 ($375,000 if Married Filing Separately) if you got your loan after December 15, 2017.

If the amounts you entered for principal balance total to more than $750K, TurboTax will limit the deduction.

Multiple 1098s in TurboTax Online

Multiple 1098s in TurboTax Desktop

Re: Adding more interest expense

jyeh74 — Tue, 27 Feb 2024 19:10:20 GMT

@DawnC Thank you for clarifying. So for 2023 tax year, you take the principal balance as of 1/1/23 NOT principal balance as of 1/1/24. Principal balance as of 1/1/23 was 0.

Because @JulieS said "For the original mortgage, enter the outstanding principal as of January 1 of the current year (ie: 1/1/24 when preparing a tax year 2023 return)." Probably a typo.

Re: Adding more interest expense

DawnC — Tue, 27 Feb 2024 19:22:29 GMT

Yes, but if you took out the loan during 2023, enter the original amount of the loan. Example, if you took out a $100K on July 7, 2023, the outstanding balance TurboTax is looking for is the full $100K - the balance as of the date you originated the loan (7/7/23). The original mortgage or a loan that you took out in a previous year would use the principal balance as of 01/01/2023 (the box 2 amount)

Box 2 of Form 1098 shows the outstanding principal on the mortgage as of January 1 of the calendar year of the tax form. If the mortgage originated during the calendar year, it shows the mortgage principal as of the date of origination. If the recipient/lender acquired the loan in the calendar year, shows the mortgage principal as of the date of acquisition.

Re: Adding more interest expense

jyeh74 — Tue, 27 Feb 2024 19:37:12 GMT

Box 2 doesn’t show anything. So when I called the bank, they said if you’re doing taxes for 2023, they are asking for the balance as of 1/1/23 which is 0.

Re: Adding more interest expense

MonikaK1 — Tue, 27 Feb 2024 22:13:22 GMT

@DawnC is correct; enter the original loan amount in Box 2 for a loan that originated in 2023, even if the lender failed to include it on your form.

The IRS instructions for Form 1098, box 2, state:

Enter the amount of outstanding principal on the mortgage as of January 1, of the current year. If you originated the mortgage in the current year, enter the mortgage principal as of the date of origination. If you acquired the mortgage in the current year, enter the outstanding mortgage principal as of the date of acquisition.

Re: Adding more interest expense

jyeh74 — Tue, 27 Feb 2024 22:44:48 GMT

@MonikaK1 @DawnC

So when I do 2024 taxes next year, I want to know the principal balance as of 1/1/24?
And why do they ask this?

Heloc loan originated in July 2023 and is used for primary house. The other 1098 is primary loan that originated after 2020. Both loans combined are over $750k.

For the Heloc loan, why is it that when I enter box 1 - interest paid in 2023, my total refund increases? But as soon as I enter the $100k as the principal balance for origination loan amount in 2023, the refund goes back down? If it’s limiting the interest deduction due to the primary loan being over $750k, then adding Heloc loan should not change refund amount since anything additional would be limited and not make a difference in the total refund amount. It goes up when I enter box 1. It dramatically goes down when I enter the $100k principal balance. So confused.

Re: Adding more interest expense

DawnC — Wed, 28 Feb 2024 00:28:02 GMT

Yes, we want to know the principal balance as of the beginning of the year. The IRS lets you deduct your mortgage interest, but only if you itemize deductions. You can't deduct the principal (the borrowed money you're paying back). In addition to itemizing, the principal amount of debt can’t exceed $750,000 to get the full deduction. We ask that question because we need to know if the total amount of mortgage debt is over $750K. You confirmed that it is, so we have to calculate the average principal balance during 2023 to figure the portion of your interest that is deductible.

When you enter the interest, the program adds the full amount to deductible interest. But as you go through and provide the details, TurboTax applies the limitation. Since you are using the desktop program, you can click on Forms at the top, and view your Deductible Home Interest Worksheet to see how the deduction limitation is applied.

From IRS Pub 936 - Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home (your main or second home). It must also be secured by that home. If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that isn't more than the cost of the home plus substantial improvements qualifies as home acquisition debt.

Home acquisition debt limit.

The total amount you (or your spouse if married filing a joint return) can treat as home acquisition debt on your main home and second home is limited based on when the debt is secured.

For debt secured after December 15, 2017, the limit is $750,000 ($375,000 if married filing separately).

Re: Adding more interest expense

jyeh74 — Wed, 28 Feb 2024 00:43:04 GMT

@DawnC Turbo Tax already limited my deduction when I entered the primary loan interest expense, since the primary loan is over $750k. So when I add the second Heloc loan, it shouldn’t reduce my total refund further. The total refund should just stay the same and not allow more deduction. Not reduce the refund.

Re: Adding more interest expense

VolvoGirl — Wed, 28 Feb 2024 00:56:01 GMT

If you are using the Desktop program then switch to Forms mode and check the whole 1040 before making the entries and then after each entry to see what changed. You can print out the 1040 each time to compare them line by line.