Double counting of refi mortgage principal balances

[dln13]

I have 2 1098s as a result of refinancing a loan in 2020.  When both are entered into TurboTax the system double counts the balance which limits the overall amount of deductible interest.

Also, I need to make sure the new 1098 inputs so that it is flagged as a refi of a 2015 loan.  This way the loan will be subject to the old $1M limit and not the new $750K limit.

How should I enter these 1098s to solve both of these problems?

[Olly1]

I have the same issue - Turbotax support suggested entering Box 2 of the Refi 1098 as 0 but that doesn't work either because it assumes that you held the original mortgage for 12 months with no way of overriding it.

This is riddled with errors, to the point where I'm debating giving up and using different software.

[dln13]

I actually went back and looked at the 2019 TurboTax version, and there you have to manually calculate and enter the adjusted amount of mortgage interest that was deductible due to the $1M/$750K limits and the shifting timeframes.

For the 2020 version, they appear to be trying to automate this to make it a little easier.  The new form "Ded Home Mort" did not exist in the 2019 version.  It appears that it is faulty though and will need some updates if it is to work correctly.  One may be able to manually adjust it on the Schedule A as well, but I am not sure.

Turbotax team: Please fix the bugs on this new worksheet!

[Critter-3]

Since the IRS never sees the 1098 input screens at all  a workaround is to simply enter the amount of interest paid as just one total  on ONE  1098 entry screen instead of 2 screens.  

[Deadmanonleave]

My loan was transferred in 2020 and I am having the same issue!  This issue dramatically reduces the mortgage deduction in half.  I have tried to manually adjust the number but it does no good.  There's also a checkbox in the "forms" version of the Home Int Wkst that states the loan was paid off, but it still does not change the balance.  

I saw the other comment to enter the two 1098 forms as one but I don't know what the IRS does or doesn't see.  They will have two 1098s reported to them.  Won't match what I'm reporting.  Then happy audit time. 

[JoannaB2]

Yes, you may claim mortgage interest deduction regardless of the number of lenders as long as the loan does not exceed $750,000 for married filing joint ($350,000 for single filers). The home mortgage loan must be secured by the property to qualify for the deduction. The following are steps to enter deductible home mortgage interest:

1. Login to Turbo Tax, Online of Desktop version.
2. Under Federal Taxes, in Deduction and Credit tab, click "I'll choose what I work on".
3. Under " Your 2020 Deduction and Credit", click update or start next to Mortgage Interest, Refinancing, and Insurance.
4. Under " Home Loan deduction summary" click edit  and enter the lender's information, one at a time.
5. Click continue until you get to the screen " Is this loan secured by a property of yours?" 
6. Click Done.
7. The next screen is a question " Do any of the situation apply to you?". Your answer here will determine if your loan exceeded the allowed home mortgage loan amount.

See,can i deduct my mortgage interest?, for additional information.

[dln13]

These steps do not work because the TurboTax form "Ded Home  Mort" always double counts the outstanding mortgage principal line.  For example, if you refinanced a $600K mortgage there should be no limit to deductible interest, but if you enter two 1098s for the same property it will think there is a $1.2M average balance and limit the interest.

You can fix it manually, but I am quite surprised that Intuit/TurboTax did not program an effective way to enter refinances into the software.  I imagine that refis are quite common.

I challenge anyone to provide a step-by-step process to enter information from 2 1098s as received from the lender and not have it double count the principal for average balance purposes.

[JantovenNF]

@dln13 How did you fix it manually?  I am having the same problem.  TurboTax is adding my multiple refinance values (I re-fi'd twice), which means my outstanding mortgage balance is triple what it should be, which is in turn severely limiting my mortgage deduction.

[JantovenNF]

@JoannaB2 This is not correct.  There are so many of us who are having this issue with multiple re-finances on a single property.  I imagine there are many, many of us in this boat, as a lot of us refinanced last year.

There needs to be a way that TurboTax's software can be amended so it calculates the AVERAGE of the outstanding mortgage balances and does NOT just add them up.

[dln13]

@JantovenNF

Forms View -> Schedule A -> Right click, Override.  I have the desktop download version which lets you do an override, but I have heard that the online version does not.

[JantovenNF]

@dln13 

Thank you so much!  That works for me.  I appreciate your response, I had no idea you could do this.

Still - the other sheets won't match, in terms of what we submit federally, so I do hope there is an update to this system so that TurboTax does this correctly.  I don't want to be flagged for an audit because my entries are mis-matched.

[jlbrick]

See extensive discussion of this bug here:

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/bug-with-refinance-on-a-large-mo...

[yyao3]

I finally find the fix or workaround for this. Please go to form review (Ctrl-2) and find the form named - Ded Home Mort. "Override" the numbers you feel wrong including:

1. Months loan outstanding in "Part 1" in page 1

2.  num 7 in "Part 1" in page 2 (which is the most important one): please change it to the right average balance.

And if you find the error in the state return, you can delete it in the state, then turbotax will regenerate the new form with the right data.

The trick part: How to "Override" the data in the form?

originally you only can change the cell with yellow color which are the ones you input in the "step by step" mode. for other cell, you can use "override" to change it. How to override? two methods:

move your mouse on the cell you want to change then

1.  Ctrl-D

2. right click and choose "override"

Regards

Yong

[AmyC]

Technical is working on the issue. Please go here to receive email notifications.

When you override the program, it voids the warranty on the accuracy guarantee. You can un-override when the program is corrected.

New: retroactive for 2018 and 2019 also, MIP is deductible again. Mortgage Insurance Premiums, see Changes to the Deductibility of Mortgage Insurance Premiums (MIP) | Internal Revenue Service (irs.go...

[JantovenNF]

@AmyC 

How do you "un-overide" the program, if you have already overridden it and entered your own values / averages?