Entering multiple 1098s due to a refinance is incorrectly triggering the $750,000 principal limit on home loan interest deductions.

[jkstephens412]

I've read through this whole thread, and there are a few options/advice to handle this workaround. Will you @JotikaT2 @ReneeM7122  please clarify? 

For 2020, I refinanced my primary/only home loan twice. Once in March 2020, another in September 2020. I have 5 1098s to enter. I've entered them all together, separately (5 entries), and also separately by refi (2 entries). Which is correct?

[dyee178]

@JotikaT2 How did you get the "was the loan paid off..." screen when entering lenders? I entered both of my lenders but never came across that question. I used both the guided and self-guided routes.

[wilfsdad1965]

you don't unless you say  you took money out during the refi,  that's one of the problems, it should ask you that regardless.

[wandersu15]

Hi there, i appreciate your reply, but I still have issues. As a few other folks posted above, there is not a screen pop up that ask me if the loan was paid off.

I do see quite a few different workaround proposed by the experts in this thread. Some asking us to put in “0”, which apparently took away e- file;  some asking us to put in “1”.  Some asking us to create a fake 1098 entry by combining multiple refinanced loan. 

I can also see this issue being discussed even in previous years, why can’t this issue be fixed by TurboTax? Refinancing is so common these days.  I didn’t choose to pay for a software so I can spend more time on preparing tax return.

[ReneeM7122]

You should combine all of the 1098s directly related to the refinance and enter it as one 1098.  Any 1098s not directly related to the refinance should get entered separately.

@jkstephens412

[jkstephens412]

@ReneeM7122 

So it'd look like this? As three separate entries since I refinanced twice in 2020? Or all together? I've tried different combos and get vastly different return amounts. I'm using TT online, so am limited with my editing capabilities previously discussed.

Lender # 1 (original loan 2018, 0 points) - Entered alone

Lender #2 (first refi loan 2020, no points) - Entered with lender #3

Lender #3 (refi lender #2 sold loan to)

Lender #4 (2nd refi loan 2020, with points) - Entered with lender #5

Lender #5 (refi lender #4 sold loan to)

[ReneeM7122]

If you refinanced, you should combine all of the 1098s directly related to the refinance and enter it as one 1098.  Any 1098s not directly related to the refinance should get entered separately.

@jkstephens412

[dan971]

Intuit, any update on the bug fix?  I am not comfortable using or paying for this software until the fix is completed. 

[Anonymous]

That seems like a sketchy workaround to combine all the 1098s and then I don't have the ID information for all the 1098s that were reported to the IRS.

[ReneeM7122]

The bottom line is not affected by combining multiple 1098 forms. Because you're backed by TurboTax 100% accuracy guarantee, there is no concern for a potential audit.  

To obtain information about what was reported to the IRS, you can request the information from your IRS account.

@Anonymous

[Anonymous]

thank you @ReneeM7122  for the reassurance!

[ReneeM7122]

You are most welcome @Anonymous !

[TaxesinVA]

How should I handle when the 1098s cover two properties?

Property 1: Refinance in early Jan 2020 and then sold in July 2020. 

First 1098 covers early Jan and second 1098 covers Jan-July. Outstanding mortgage balance was an average of $760,000.

Property 2: Purchased in July 2020 and loan was sold in August 2020

First 1098 covers July/early August and second 1098 covers August-December. Outstanding mortgage balance was an average of $1,100,000.

So adding the 1098s doesn't quite work correctly either. Because the limiting formula is different for each half of the year. I currently did it as two 1098s, but then it's limiting as if my outstanding mortgage balance was basically $1.8M.

[Michael128]

So following the instructions to combine the two 1098's into one 1098, presents a problem.  It makes it impossible to select only one answer:

• Yes, this is the original I used to buy or build my home.
• No, this is a home equity line of credit (HELOC) or a loan that's been refinanced.

It is both now.  One 1098 was for the original loan and one 1098 was for the refinanced loan.  Which one do you choose?

Also side question, what do you put for the lender name on the combined 1098?  I just chose the lender name of the original loan, since most of the information from the combined 1098 comes from the original loan.

[JohnB5677]

I'd like to suggest a slightly different alternative.

If you've refinanced or had your mortgage lender changed, the outstanding mortgage principal listed in the combined total of them on Line 2 of the 1098 will be too large.

When you put an outstanding balance in both forms, then the program adds them together and if that number is greater than $750k, then it puts you in the category to "limit interest".

To get that to go away, you need to go back to the deductions section and click on "edit" mortgage interest statement.  Enter both 1098's.

Change the line 2 of the mortgage that you no longer owe on (like the one that you refinanced and paid off) to a 0 (zero) because you have refinanced out of that loan and no longer have an "outstanding mortgage principal".