2019 Refinanced Mortgage and Mortgage sold, so I have 3 1098s. Turbo Tax seems to think I have two mortgages instead of one.

[walabieKid]

In 2019 I refinanced my Mortgage and the refinancer sold my mortgage to another servicer in 2019, so I have 3 1098s.  My problem occurs when I enter my info into Turbo Tax and it seems to think I have two mortgages instead of one and thus drastically reduces my tax return by almost $5000.  When I omit the middle 1098 that was from the refinance, the Turbo Tax return numbers come out correct.  Is there a way to enter all three (3) of my 1098's for my one mortgage that will have make turbo tax come up with the correct values???? 

[DianeC958]

Yes. When entering more than one 1098 it is important to put the correct information into Box 2 of the form.  Box 2 is asking what the balance on the loan is as of 01/01/2019. When you add the 1098 for the new loan the amount in Box 2 should be $0. 

Review the information in the program so that it does not limit the amount of your mortgage interest deduction.

Link on how to enter mortgage interest into TurboTax

[walabieKid]

Do you mean the balance of the loan as of 1/1/2020? 

[DMarkM1 · Accepted solution]

The mortgage servicer should follow the IRS instructions for completing the form 1098:   

"Box 2. Outstanding Mortgage Principal
Enter the amount of outstanding principal on the mortgage as of January 1, 2019. If you originated the mortgage in 2019, enter the mortgage principal as of the date of origination. If you acquired the mortgage in 2019, enter the outstanding mortgage principal as of the date of acquisition."

Therefore, you should enter the box 2 information as it is on the form 1098s.  If the box is empty, you don't know what the number is, so put a zero there.

Once you have entered all form 1098s and select "Done", TurboTax will subsequently ask you if you exceed the mortgage limits or not.

"Do any of these situations apply to you?"

• Mortgages that were taken out on or before December 15, 2017 and they total more than $1 million ($500,000 if Married Filing Separately).
• Mortgages that were taken out after December 15, 2017 and they total more than $750,000 ($375,000 if Married Filing Separately).

If you do not exceed the limits, inspite of what the worksheet calculations are, then you select "No" for this question and your mortgage interest deduction will not be limited. 

If you really do exceed the limits then answer "Yes",  and you will need to manually calculate the mortgage interest deduction using table 1 on page 12 in publication 936 and enter the amount in the box provided.  The worksheets in either case are not filed; they are for calculations and records only.   

[ptp]

I am having the same problem. I entered info from the 1098s as recieved from mortgage companies. Unfortunately Turbo tax is auto selecting "Yes" to the interest limitations question. When I revert to no (as neither situation applies) it says I must enter info on the worksheet during SmartCheck.

[DianeC958]

The information in box 2 for refinanced mortgages needs to be $0.  The box is asking about the loan balance as of 01/01/2019.  It you refinanced the mortgage in 2019 or the loan was sold in 2019 the beginning balance as of 01/01/2019 is $0.

By changing the amount to $0 for box 2 the program will not limit the amount of interest as a deduction unless your loan balance is over the $1,000,000 limit for a loan taken before December 16, 2017 or $750,000 for loans that started after that date.

Link to Can I Deduct my mortgage interest.

@ptp

[JKL19]

I'm still confused on this question. So, for my first 1098 with my original loan, I enter in the outstanding mortgage principle amount in box 2, right? And then on the second 1098 for the refinanced loan I enter 0 in the outstanding mortgage principle  box 2, even though it has the new loan amount number in box 2? And then what do I enter in box 2 on the third Substitute 1098 from the lender who my refinanced loan was sold to?

[KrisD15]

No, enter the 1098 as they are reported to you. No form 1098 for 2019 should have a blank box 2. It is either the balance on 01-01-2019 OR the balance of the loan on the day you took it out in 2019. (reporting changed since 2018)

If, after you enter the forms, you get an error concerning the loan balance being over the limit, please follow these instructions: 

ONLINE USERS:

Please go back to the Home Mortgage Interest section:

Click Federal on the left side-bar

Click Deductions & Credits along the top

Scroll down to “Mortgage Interest and Refinancing (Form 1098)” Click Edit/Add

Scroll down the “Here’s your 1098 info” screen and click Done.

Next screen asks “Do any of these situations apply to you?” Select “Yes, one or all of these situations apply to me.” and Continue.

On the following screen, you will see the “Original amount”.

Enter the amount you can claim as a Home Mortgage Interest deduction in the “Adjusted amount” box. The Adjusted amount cannot be larger than the original amount or you will receive an error when trying to file. Instructions on who needs to adjust interest and how to calculate are available by clicking the blue “Help me figure this out” link.

DESKTOP USERS:

Go into Forms (top right)
Enter the amount on Tax & Int Wks
Mortgage Interest Limited Smart Worksheet section
Line A2

OR

Step by Step

Federal

Deductions & Credits

Mortgage Interest, Refinancing and Insurance Click Update

Click Done

Click Yes, one or both of these situations apply to me. And Continue

Enter the Adjusted amount and Continue

[JKL19]

So can you claify the question "do any of thes situations apply to you? (mortgages taken out after Dec. 2017 and they total more than $750,000). Is that asking if all 3 of the outstanding mortgage principals total more than $750,000 even though I didn’t have all 3 outstanding principals at the same time? I had one loan first, then refianced it, then it was sold. So I never had a total of more than $750,000 at the same time, so I orignially answered no, none of these situations apply to me, but the software if changing my answer to yes, is that correct because all 3 outstanding princples do total more than $750,000 for the whole year, even though my outstanding principal at one time was never over that amount? Does this make sense?

[KrisD15]

You do need to answer "Yes" even if you are eligible for all the interest. 

ONLINE USERS:

Please go back to the Home Mortgage Interest section:

Click Federal on the left side-bar

Click Deductions & Credits along the top

Scroll down to “Mortgage Interest and Refinancing (Form 1098)” Click Edit/Add

Scroll down the “Here’s your 1098 info” screen and click Done.

Next screen asks “Do any of these situations apply to you?” Select “Yes, one or all of these situations apply to me.” and Continue.

On the following screen, you will see the “Original amount”.

Enter the amount you can claim as a Home Mortgage Interest deduction in the “Adjusted amount” box. The Adjusted amount cannot be larger than the original amount or you will receive an error when trying to file. Instructions on who needs to adjust interest and how to calculate are available by clicking the blue “Help me figure this out” link.

DESKTOP USERS:

Go into Forms (top right)
Enter the amount on Tax & Int Wks
Mortgage Interest Limited Smart Worksheet section
Line A2

OR

Step by Step

Federal

Deductions & Credits

Mortgage Interest, Refinancing and Insurance Click Update

Click Done

Click Yes, one or both of these situations apply to me. And Continue

Enter the Adjusted amount and Continue