Bug in Software? Full mortgage interest deduction not be calculated when entering multiple mortgage lenders.

[AmyC]

@sacnorad  On the schedule A, only the total deductible mortgage interest shows for your tax return. Everything else is just supporting worksheets. If your mortgage balance is below $750,000, then you can just add the interest together and use your most recent balance when refinancing.

[sarahmill74]

So to go to our particular situation, we refinanced in April. The lender then sold our loan in Sept. I have a form from the original lender for Jan-Marchish; one from the refinance lender for April thru Septish; one from current lender who bought the loan and has Sept thru Dec. Based on this, what do i do to make this work?

Was so happy to see others having same issue because i was about to take everything to an accountant and pay to have it fixed since TT keeps asking about a 1099B when we never sold any property.

[DawnC]

What do I do if I have multiple 1098s from refinancing my home debt?   @sarahmill74   This linked article will help you to get your mortgage interest corrected in TurboTax.   A 1099-B, Proceeds from Broker and Barter Exchange Transactions, would be requested if you indicated that you sold stocks, bonds, or mutual funds.  

What is Form 1099-B: Proceeds from Broker Transactions?

[wddozier]

It's 3 months later, taxes are due tomorrow, and this is still not fixed. Hooray Intuit!

[nobueno]

Last time I use TurboTax.

[JuniorTT]

The same issue is happening with tax year 2021.  How is this not fixed yet??

[wddozier]

It's not solved because Intuit doesn't GAF.

[seattlelostpack]

LOL i've spent like 6 hours trying to figure this out. Still not sure what the right thing to do is, and all I did was a simple buy and sell in 2021. Bought a new (primary) house in June and sold my old (primary) house in August. Definitely not using TT next year if this isn't resolved. How many ppl have submitted taxes and not caught this??!

That said - the IRS Pub should probably have verbiage on what to do when you buy/sell in the same year...but alas government

[DaveF1006]

It depends. Here is the recommended steps to report these events correctly so that your mortgages are prepared correctly.

1. For the house that was sold, do not list an outstanding mortgage principle in Box 2.
2. When you add the second 1098 for your new house, enter the outstanding mortgage principle in Box 2.

Entering this in this manner will ensure that you will not face the issue of a mortgage limitation for mortgage amounts over $750K. This also face scrutiny by the IRS. 

@seattlelostpack 

[geffde]

You are not wrong at all.  I'm in the same situation of moving primary residences, closing on the new home in March and the old home in May.  The IRS Publication seems to contradict itself, but at least some clear guidance on this very common tax situation would be a wonderful start.

[geffde]

Hi @DaveF1006,

As I said in my reply to seattlelostpack, I'm in a similar situation.  I moved primary residences, so I closed on buying a new home in March and closed on selling my old home in May.  I bought my old home in 2013, but I'm running into the mortgage limitation for mortgage amounts over $750K even though neither my old home nor my new home had mortgage values over $750K (or, I guess, $1M for the old home).

I'm using the Deluxe desktop version, and it does not let me not list an outstanding mortgage principle in Box 2.  Is it okay to just add $1 to that box?  

[RaifH]

The mortgage interest limit is calculated based on your average mortgage balance for the entire year. In your situation, it sounds as if your average balance will not exceed $750,000 and your deductible interest should not be limited. You will want to calculate the average monthly balance for each loan and report that as your outstanding mortgage principal. You can do this by taking the Outstanding Mortgage Principal reported in Box 2, multiplying it by the number of months you carried the loan, and dividing that number by 12. Do this for both loans and report the calculated number as the Outstanding Mortgage Principal:

1. In the Federal > Deductions & Credits section of your return, scroll down to Your Home and click Revisit/Start next to Mortgage Interest and Refinancing (Form 1098)
2. Answer the questions and enter the information from your Form 1098s. Use the calculated amount for Outstanding Mortgage Principal. For Box 3, Mortgage Origination Date, use the original purchase date even if the Form is for a refinance.
3. Answer What kind of property is this loan secured by?
4. Answer Yes or No to  We didn't pay any points.
5. Answer Yes to Let's see if this is the most recent form for this loan.
6. Answer Is this the original loan used to buy your property? 
7. Answer Is this loan a HELOC or a refinance? if it is not the original loan
8. Answer Did you take cash out? if this loan is a refinance or HELOC
9. Once you have entered both and are back in the Home loan deduction summary screen, click Done.
10. If your total outstanding mortgage balance is under $750,000, you should be done at this point. All mortgage interest reported in Box 1 will be a valid itemized deduction. 
11. If your outstanding mortgage exceeds $750,000, answer NO to Do either of these apply to this loan? Answer No even if it does apply, by using the mortgage origin date of the original purchase back in step 3, TurboTax will correctly apply the proper mortgage limit on your home acquisition debt. 
12. Enter the calculated outstanding loan balance again for the amount on January 1, 2022 in the first field. Leave the second field blank. 

TurboTax calculates the average balance by taking the average of the outstanding mortgage principal on Form 1098 and your balance due on January 1, 2022. By reporting your calculated average balance for both, it will apply the mortgage limit based on that amount. 

@geffde

[techjack]

I'm hitting the same issue.

My loan was transferred from one lender to another.

The second lender's interest is not deducted.

How do I fix this?

[ashc]

This doesn't work for me.

I added the combined of interest of all 1098s from old home in Box 1 and zero outstanding balance in Box 2.

I see some Federal Tax Due amount on the top.

When I add the new 1098 (from the new home with >1M loan amount), my "Federal Tax Due" amount increases. How is this even possible?

[RaifH]

If your lender's new 1098 has a mortgage acquisition date in Box 11, you can enter both Form 1098s as they appear. Answer No for the old loan to Let's see if this is the most recent form for this loan and Yes for the new one.

If they do not have a mortgage acquisition date, you can combine both 1098s into one entry in TurboTax. Enter the 1098 in this way:

1. Box 1 Mortgage interest - Add the amounts together from both 1098s
2. Box 2 Outstanding Mortgage Principal - Use the Box 2 amount from the first loan
3. Box 3 Mortgage Origination Date - Use the Box 3 date from the first loan
4. Boxes 5 & 6 - Use the sum from both 1098s
5. Make sure Box 7 is checked

@techjack

It is possible if the interest from your old loan is still considered an outstanding loan. This interest is then limited based on the outstanding principal of your new home, which may decrease your deduction. Make sure to answer No for the old loan to Let's see if this is the most recent form for this loan and Yes for the new one. Mark them both as your primary home. You may need to add an outstanding principal of $1 for the old home's 1098. 

@ashc