2022 Tax Deduction on Refinanced Mortgage

[bretton]

I refinanced primary home mortgage of around $850K.  Premier desktop seems to think the interest should not be deductible.   I understand the tax law changed, but isn't deductibility based on the original loan date, not the refinanced date?  If I enter the refi date (from the 1098), I get no deduction.  If I enter the original loan date, I do get the deduction.   Is the system just wrong or am I misinterpreting the tax law?

[GoneSailin74]

It seems to be broken again for 2022 tax year.

If you go into the forms and look at the worksheets, adding the date the loan was paid off in 2022, and the outstanding balance of zero at the end of 2022 seems to have helped. Also the original purchase price of the home on the worksheet.

[DMarkM1]

It depends.  If the original loan debt was grandfathered debt taken out before October 1987 then in some cases you would use the original loan date.  Otherwise the refinance loan is a new loan with a new date to consider the limitation.  Click here for Publication 936 for detailed information on Mortgage Interest Deductions.    

Having said that, there should still be some deductible interest.  Generally, with a loan limit of $750K / average loan balance of $850K yields a percentage of approximately .88 of interest that would be deductible.  

When answering the interview questions for the old (first) loan be sure to indicate "NO" this not the most recent loan.  Then answer "Yes" to that question for the second (current) loan.  

Ultimately if TurboTax shows your mortgage interest deduction is limited, you will arrive at a page giving you the opportunity, with help, to enter your calculation of your mortgage interest deduction.  

Neither the worksheet nor your 1098 entries are transmitted to the IRS as part of your filing.  So be sure to keep a copy of your calculations with your tax records should the issue ever come up.

[GoneSailin74]

This is NOT what is happening. TurboTax is not calculating the deduction correctly. It was a zero dollar out refinance. TurboTax is double counting the loans, as it doesn't even ask for when the preceding loan was paid off in 2022.

I know how the tax code works, the problem is TurboTax is calculating the values incorrectly.

Never mind that it isn't giving me the opportunity to deduce points from previous loans. I had this same problem in 2020.

[MarilynG1]

If the loan was paid off via refi, the final balance is the principle that was transferred over to the new loan.  You think it would be zero, but if you read the TT interview it tells you to put the last payment, which means the principle that was moved over.  TT knows how do deal with it, because you have checked the box that the loan was paid off.

This article on Multiple 1098's may be helpful. 

[GoneSailin74]

Would be nice if TT did that, but it doesn't. I'm having to manually enter it in the forms.