Entering percentage for Cash Out Refinancing

[Munogojerry11]

Hi,

I know this has been answered in various posts on the *value* to enter, but I can't figure out how to get Turbotax to calculate the percentage I should be able to deduct.

We refinanced with a cash out in 2021, I know the previous loan/new loan value (92.6%) and we didn't use the money for capital improvements (we painted exterior of house and purchased carpet), but Turbotax doesn't allow me to put in a percentage of our mortgage that should be deducted. 

How do I make sure Turbotax is giving us the correct amount for our mortgage deduction (from the change in numbers, I don't believe it's giving us any deduction given the amount of interest we paid and the amount of cash we took out)?

Thanks!

[RobertB4444]

TurboTax may be looking at your mortgage deduction and concluding that the standard deduction is still better for you.  

The standard deduction for a married filing join return for 2022 is $25,900.  That means that the federal government has decided that you most likely spent at least that much money this year on stuff that they shouldn't charge tax on.  

If you think that you spent more than that on things that shouldn't be taxed then that is where itemized deductions come in.  You add up your medical deductions, state taxes, property taxes, mortgage interest and charitable donations and then the total has to beat that standard deduction of $25,900.  It's a high bar to clear - an awful lot of people who used to itemize don't anymore.

It sounds like the system has decided that you don't have enough to itemize yet.  Keep entering your information in and see if you can beat that $25,900.  

@Munogojerry11 

[Munogojerry11]

Thank you for the quick response! We have over 30k taking the itemized deductions (it's what Turbotax is selecting for us and given our typical donations, deductions and credits, we always use the itemized deductions), but it's not only not letting us use a percentage of our mortgage for part of our deductions, but it's not even showing up anything from our mortgage interest on the final federal review? I don't understand why we wouldn't be able to have the mortgage interest deduction show up (we had >9k in mortgage interest)...?

As an aside, we over funded our HSA, I estimated what we would have overfunded and took out about 60 more dollars than we overfunded, Turbotax is also not letting us put in what we took out (we overfunded by about 940, but I took out 1000). Shouldn't we have to pay taxes on the 60 dollars we took out? What can we do to rectify this, I don't want to have issues because I didn't pay taxes on the 60 dollars...

I'm getting a bit annoyed at the software this year, we have the Deluxe version, but it's not letting us put in values when we should be able too.... 

Thank you for your time attempting to help!

[Munogojerry11]

Sorry, I stand corrected, it is now tallying it as the ~9k, but it's saying I can't deduct it. It *should* allow me to deduct that (if only a percentage), I'm not sure what the issue is?

[Munogojerry11]

Yep, definitely getting frustrated. If I say it's not a refinance and just put in the 9k, it gives us 2k more (we shouldn't obviously get that, but should get about 90% of that). I'm not sure how to get the jacked up software to work properly.

[fanfare]

Get IRS pub 936 and calculate the deductible part yourself according to the Instructions.

Then enter that amount on Schedule A.

@Munogojerry11 

[BillM223]

"As an aside, we over funded our HSA, I estimated what we would have overfunded and took out about 60 more dollars than we overfunded, Turbotax is also not letting us put in what we took out (we overfunded by about 940, but I took out 1000). Shouldn't we have to pay taxes on the 60 dollars we took out?"

We discourage taxpayers from removing excess HSA contributions because it is difficult for them to correctly determine the actual excess. 

The HSA is not a savings account that you can willy-nilly withdraw money from. Instead, when you took out the $1,000, you withdrew an excess of $940 (if this is what TurboTax told you in the HSA interview), and you also requested a distribution of $60 for reasons other than reimbursement for medical expenses. This $60 should be added to Other Income when you enter the corresponding 1099-SA, so not only will it be taxed, but it will be penalized 20%, because you should not withdraw money willy-nilly from the HSA, as I said.

When the 1099-SA arrives, you will probably have to add a second 1099-SA. The "real" 1099-SA will have a distribution code of '2' in box 3. Enter this 1099-SA as is.

Then add a second 1099-SA, with box 1 of $60.00, box 3 of '1', and after you enter this, when TurboTax asks is any of this distribution was used for medical expenses, answer "no". The $60 will be added to Other Income and you will be penalized 20% of the $60 on top of that.

The ONLY way around this is to see if you have unpaid medical bills sitting around for $60.00 or more. Then make your self a note that you withdrew this $60 to reimburse yourself for that bill, and stick the note in your tax file, in case anyone ever asks.

OK?