Incorrect California mortgage interest calculations

[mark_sd]

I'm using TurboTax Deluxe for Windows.

I spent most of the day yesterday working on California mortgage interest adjustments. The California worksheet is terribly flawed:  it fails to pull in some critical numbers from federal, and if you override the numbers, it does the calculations incorrectly. It imposes a $100,000 cap on home equity loans, misinterpreting the California rules about home acquisition debt and equity debt. There is also no adjustment for the portion of mortgage interest reported on form 8829.

I spoke with support and after checking a few things, the agent was getting lost. It's a very complex topic, so that's understandable; I needed to speak with an Intuit California specialist. However the agent did not escalate the issue, telling me that I should use overrides to fill in the correct amounts. "Do your own calculations and fill in the form yourself" is not the advice you hope to hear from a tax program vendor.

These program errors make a difference of several hundred dollars on my state taxes, yet the program acts as if everything is fine ("you shouldn't need to change these numbers"). I wonder how many hundreds of taxpayers are overpaying their California taxes because of these incorrect calculations.

[flandar]

I'm also seeing errors in the California mortgage interest calculations.

My loan was refinanced and then resold.  This gives me 3 different 1098 forms.  When I enter the 3rd lender tax deductable interest, my California taxes increase for some unexplained reason.  I tested by entering a fictious 4th lender and my California taxes increased again by nearly $400.  

I reviewed the CA 540 result and see for some reason the line "Interest you paid" line 8a, 8e and 10 all have a value of $-4067 or $-7362.    (resulting in a $400 tax increase, or with the test 4th a $700 tax increase)

I cannot see why this number exists.  I cannot see any reason why paying addition interest (a tax deductible event) would raise my taxes (State only).  I can't see why a 3rd or 4th lending would change anything.

I think there is a serious error here

[SoCal_Blade]

Agreed - this portion of the CA software is flawed. It doesn't bring over any proper numbers from Federal and is not easy to follow. Per the help pop-up CA allows mortgage interest deductions on 1st and 2nd mortgages include HELOCs. I have the worksheets I used last year in my paperwork and see I was able to deduct more (compared to Federal due to new tax law in 2017) but TT seems to not be setup to allow for this very easily. Please fix this ASAP. We have paid for this software to be accurate and you promote that you'll get us the biggest tax refund or pay the lowest in taxes but so far that is not what is happening. As others have said, I am sure many people are paying too much to CA.

[jwsel]

I'm having the same problem.  Like flandar, I have three 1098s -- the original lender, the lender to which the loan was transferred, and the lender that refinanced the loan.  Because the last loan was a refinance, it should use the same home acquisition debt as the prior loan (so I am not subject to the $750,000 limit).   I had to manually adjust the federal form to fix it so it would limit the deduction.  (The instructions for that worksheet were useless and contained no discussion or boxes to reflect refinances of pre-2017 limits.)

Now the California form wants to adjust for interest and points reported on form 1098 by -$12,557, which would increase my state tax by nearly $1,200.  There is no explanation for how that figure is calculated.  When I click on the link for "Why would I adjust my mortgage interest," I get a pop-up that tells me only that California does not subscribe to the federal $750,000.  But that difference, if applicable (which it is not), would increase my the deductible state interest, not reduce it like the software is doing. 

I agree that this is a very serious error.

[josephinechan]

I also spent hours trying to figure this out, and I noticed that the amount of the adjustment should not be a negative number, if you switched the number TurboTax calculated to a positive number, it looks to me that is the correct amount for the extra deduction.  However, I have not done the complete calculation on my own to double verify of the figure is accurate.

[Melinda74]

As you all have mentioned, I have also spent all day trying to figure out this issue.  Has anyone received an answer from TurboTax as to when this bug will be fixed?

[tnhuynh23]

Having same exact issue. 

[clpedersen7]

Same here. What did you end up doing?

[flandar]

Turbo tax made a "stealth" update and added a question to the California question/income section to cover this special difference.

If you haven't filed already, you can now just review the California income section and enter the "ending" ballance of these 1098 interst paid forms and the calculation comes out right.

BUT I'M SCREWED, because I filed already, and now I cannot create an AMMENDMENT to change and fix this with the state!!

[clpedersen7]

That's frustrating! Thanks for your reply.  I'll try that out! 

[Artem]

still same issue as of today... getting a negative number even after updating those fields to 0. 

frustrating

so if I adjustMortgage Interest Manually to 0, deductions go back to correct amount. 

But is it fine to Adjust Mortgage Interest Manually or what is the best way to correct it?

[ljsister2018]

Same issue here, spent a whole day to study this question, I don't need to adjust my mortgage interest for California as my loan amount is lower than 750K, but Turbo tax insists on sending me there and gives me a negative number. 

Same question, can we manually change it to 0?

[flandar]

I found doing a software update created a new screen and fixed the calculations in the California State.  Be sure you have the latest version and check again.

[Jeff Y]

I've go the same issue with the California mortgage and interest adjustment. Why can't the entire amount of mortgage interest be deducted like it is on the Federal forms?

[stan_sd]

I spent about 5 hours on this.  Went through 3 support agents, it's 10:15PM, and no answer...I'm calling it a night.   TurboTax, if you read this, I expect a refund.  This is the second time in 5 years I've spent the better part of a day trouble shooting your software.

For me there were two issues:

1.  Turbotax is calculating the CA adjustment assuming 1,100,000 in allowable principal.  This would be correct if I had a Heloc up to the allowable limit of 100,000k.  I don't.  I (and several agents) have verified the questions multiple times (federal and state sections), redone state, re-entered mortgage interest to trick TT, deleted the CA home mortgage interest worksheet using tools/delete sheet and re-run the state multiple times...no dice.

2.  In the process of doing #1, It sometimes deleted the ending balance screwing up the average principal calculation.

TT....if this many people have an issue, fix it.  The way I found this thread was an agent suggesting this had the workaround.  It does not, at least not for me.

Zac