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

[DaveF1006]

No. I do not see a problem with this because lender information is not reported to the IRS. I wouldn't be concerned about reporting the old loan amount unless the new mortgage loan balance is above the $750K threshold.

[jaychow38]

Thanks a lot for the answer! You are awesome!

[KarenBaszak]

Has this issue been fixed yet?  From what I understand, my options are:

1. To incorrectly enter my information OTHER than what  is reported on my 1098 forms (which seems like a rather fraudulent way to overcome a Turbo Tax error in their software).

or

2. Allow Turbo Tax to force  me into taking a mortgage interest deduction for less that what I actually qualify  for, costing me an additional $3,000 in taxes.  

Wow -  Seriously?  And TT charges for their software?    I will NEVER use Turbo Tax again!!!  I will warn all of my clients who use this program also. I am CFP with hundreds of clients who naively use and trust Turbo Tax and at this point I  feel a fiduciary obligation to warn them what a horrible program this is.   It's unbelievable that this issue hasn't been fixed yet. 

[akenbake24]

Has this been fixed for 2022?

[DianeW777]

The resolution is provided in the articles below.  It's important to follow them carefully so that TurboTax can process the numbers for your return.  Keep in mind that the Forms 1098 do not go with the tax return.  The actual numbers for the mortgage interest allows the tax software to calculate within the required limits.  The IRS already has the forms so the exact detail of each form is not required for your tax return preparation.

What if I have more than two 1098s?

You should combine all of the 1098s directly related to the home mortgage and enter it as one 1098.  A sale of mortgages is a perfect example of when this will be the best action. The key is that all of your mortgage interest is included with your tax return.  Keep all of your Forms 1098 with your tax return for the details.

Add each box that has an entry and enter it in the same form with the mortgage interest.

NOTE:  The outstanding loan balance should be the actual loan balance, do not add that together from each form.  Use the most recent lender's loan balance when requested for that figure. 

@akenbake24

• How do I handle multiple 1098 forms?
• What do I do if I have multiple 1098 forms from refinancing?

[jlbrick]

I still think TurboTax could improve here. The premise of the software is "enter your forms exactly as you received them, and TurboTax computes your tax". Having to do your own computations and enter a form values that synthesize several forms that you received is contrary to this premise.

This issue also consumes so much support time. Last year dozens of support threads were created on the topic and I expect the same this year. Seems more efficient to just have your engineering team make the improvement.

[dan971]

Since Intuit has no interest in making their tax software actually work correctly, who knows what other money costing bugs are lurking? I will be looking for a new tax solution for 2021 tax year.

[akenbake24]

You're risking an audit if you have to massage the forms to a way that TurboTax can handle. It's not acceptable. This issue has existed for 2 years now and TurboTax still hasn't fixed it? Think about how many millions of dollars customers have lost because they didn't know about this bug. Truly despicable.

[jlbrick]

I created a very lengthy post on this issue last year, which they eventually closed. I invested a lot of time trying to identify other people with the same issue who were creating duplicate posts.

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

I then created a topic posts why they closed my post:

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/re-why-was-my-topic-about-the-mu...

They will *never* fix this, even though it could be fixed in an afternoon by a software engineer.

[matasetati]

I will also be looking for a different tax software next year.  This is ridiculous!  I am glad I caught it this year when I noticed my tax due go up when it should have gone down.  There was an error flag on the final check that acknowledged the problem and said it would be fixed on an update around 2/17/2022.  Updated today (2/28/2022) and the warning flag is gone but the error has NOT been fixed.  I paid for this product so that it would make correct calculations.  Realizing now that this particular error has existed for several years and not been corrected has just destroyed my confidence in the software.  What other known bugs is Intuit ignoring?  Now I feel like I need to go back and do my last two years tax returns manually to make sure they are correct.

[simplyvijay]

Hi All - been struggling with this for countless hours.

I had an original mortgage taken from Lender 1 in in 2019 when I bought a home.

In Aug 2020, I refinanced with Lender 2.  I paid about $7K in mortgage interest on this 1098. Also, At the the time, I paid points of approx. $1000 which I only just realized now (not claimed on prior returns -  only interest was claimed), and which is not reflected on the actual 1098s (my lender gave me the figure from the relevant closing disclosures).

In Feb 2021, I refinanced with lender 2 again. I paid about $38K in mortgage interest on this 1098. No points paid this time.  

In Sep 2021, I refinanced with lender 2 yet again. I paid about $11K in mortgage interest on this 1098. No points paid, once again this time. 

So, for Tax Year 2021, I have three 1098s, all from Lender 2. Total of $58K in interest paid in 2021. And $1K in closing costs paid in 2020 (not claimed).

The question: How should I address my situation with TurboTax? I tried several suggested solutions here, from combining into a hybrid 1098, to leaving 3 separate 1098s with balance entered s 0 or 1, and entering the data as is from the 1098s, etc. The result is a widely varying amount for total itemized deductions, and a tax bill that varies by $12K+ for me. So I am left with a lot of anxiety and nervousness about how to how to pay, whether to extend my filing date, etc.

Any help will be greatly appreciated. Thank you!

[DMarkM1]

Enter as one form 1098 since it is the same debt with the same lender.  Box 1 will be a total of all the mortgage interest paid. Box 2 the mortgage principle on the most current 1098.  Box 3 the mortgage origination date on the most current 1098.  Box 7 should be checked or indicate the loan is secured by a property of yours.  It is a refinance and is the latest 1098.    

You'll not get the deduction for last year's portion of your points (it's only fours months of the life of the loan so will be an insignificant amount).  TurboTax will calculate this years deductible points. You'll enter the origination date of the loan, the length of the loan and the amount of points paid (1000).  Since you refinanced with the same lender you must continue to deduct pro-ratably.        

[simplyvijay]

Thanks so much, DMarkM1! That was super helpful!

Did not fully follow the point about dedicating points pro-ratably, but am presuming if I entered all the info correctly, TurboTax will handle this correctly? Or is there something more I need to do specifically?

Also, after I entered the consolidated 1098 info, Turbox Tax is asking (as a Review Step)

Enter your loan balance as of Jan 1, 2022. I got this data from my Lender for the latest (current) loan (the others presumably zero since they were paid off as part of a new refinance). Can I just enter that data, or should I use some different data here?

Enter the date you made your final payment, or leave black if not paid off: Presumably, I leave this blank?

Finally, unrelated to the above questions - I had a capital loss in the tax year 2019 which were not fully offset by capital gains for that year. Is that balance capital loss automatically carried over into future years, or do I need to do something special? If so, what exactly? Accordingly I guess may have to file an amended return(s) for 2020.

Thanks so much once again! You've been a life saver!

[RaifH]

On the review step, enter the balance as of January 1, 2022 and leave the paid-off field blank. TurboTax takes the average of the outstanding mortgage principal in Box 2 and the balance you enter as of January 1, 2022 to determine the average mortgage balance for the year. That determines the limit on the deductible mortgage interest. Once you enter the balance on January 1, 2022 you should see your taxes go down a few dollars because it will bring the average balance down.

The points are deducted over the life of the loan. If you paid $1,000 on the refinance and you're on a 30-year mortgage, that comes out to $33 per year or so. By neglecting to report it on your 2020 return, you missed out on about a $10 deduction since you only had the mortgage 1/3 of the year. No big deal.

That being said, you may have to file an amended return for 2020 if you neglected to report your capital loss carryforward from 2019. You can carry them forward indefinitely until they are all used up. If you have no capital gains to offset, your capital losses may offset up to $3,000 of your ordinary income in a year and the remainder gets carried forward to the next year. You can read more about the carryforward rules here. 

The carryforward should appear on Lines 6 and/or Line 14 of your 2020 Schedule D. If there is any remaining carryforward for 2021, that would appear in the Federal > Wages & Income > Investment Income > Capital Loss Carryover section.