How do I enter 1098s for the original mortgage and the refinanced loan that paid off the original mortgage? TurboTax seems to be calculating the balance twice.

Some TurboTax customers are experiencing an issue with their Home Mortgage Average Balance. This can cause in the the Home Mortgage Interest to be incorrectly limited.

If you're experiencing  the issue above,  please go here to receive email notifications when any updates related to this issue become available.

@DaveF1006 do you know when this is expected to be resolved by TT, seems to be impacting quite a few customers.  Any ETA would be appreciated as this is the only thing holding me up from filing my taxes.

Since you have multiple 1098's the issue is that you will have to clear the balance due from the old mortgage.

Try the following:

1. Log into TurboTax 
2. Go to the federal section and choose Deductions & Credits
3. On the page “Your tax breaks”, select Mortgage Interest and Refinancing (Form 1098) and Start
4. Delete any Forms 1098-MTGE you have already entered in the program. Then choose the button “Add a 1098”. 
5. Enter the details from your FIRST Form 1098 – the one from your old mortgage company or before the refinance occurred. Be certain to enter all the information, including the amount in Box 2 of your 1098. According to the updated 2019 instructions for Form 1098, Box 2 should show an amount. For a loan prior to 01/01/19, the amount should be the balance of your loan as of 01/01/19. For the loan taken out in 2019 (including refinance loan or when the loan is sold to another mortgage company), the balance should be as of the date of the loan origination.
6. Continue through the interview until you reach the screen “Was this loan paid off or refinanced with a different lender in 2019?” If you’re entering the original loan, say No. 
7. On the screen “Is this loan a home equity line of credit or a loan you’ve ever refinanced”, say No
8. Continue to complete the first 1098. 
9. Add your next 1098. Be certain to enter all the information, including the amount in Box 2 of your 1098. If there is not an amount in this box, please contact your mortgage lender for the amount. It is required for an accurate calculation
10. When you reach the screen “Is this loan a home equity line of credit or a loan you've ever refinanced?” say Yes. Select the correct radio buttons and Continue to complete the interview.
11. Click Done. If presented with a follow-up question about the interest limitation and your loan balance is under $750,000 then your deduction is not limited - say No. If your loan is over $750,000 then the deduction is limited. Say Yes. You will need to manually calculate the adjustment. Please see Page 12 of IRS Pub. 936 for a worksheet that will help you calculate the amount. 

@JohnB5677 This doesn't work.  I have three 1098s as I refinanced my mortgage twice this year.  None of my mortgage amounts were over 500k but when I enter all of these into TT Online, I am not receiving the full interested deduction.  I noticed the new table that was added to put in when your mortgage was paid off and the final payment amount but that still doesn't work.  The only thing that seems to do the trick is clearing out Box 2 value on the 1098 but I am concerned as I would not be entering exactly what is on the 1098.  

Some TurboTax customers are experiencing an issue with their Home Mortgage Average Balance. This can cause in the the Home Mortgage Interest to be incorrectly limited.

If you're experiencing  the issue above,  please go here to receive email notifications when any updates related to this issue become available.

@DaveF1006 I already did that, I was just wondering if there is an ETA for this issue as it is the only thing holding me up from filing my taxes.

We have no ETA at this time but we will promise to notify you once we do.

Here is a trick if your balance never went over the maximum ... then all that entering of all the separate forms is not needed ... it is for your use ONLY  and since the IRS only gets one amount on the Sch A ... you can  just enter the information ONCE by simply  tally up all the mortgage interest onto that one form entry.  Problem solved.  

@DaveF1006 @JohnB5677 can you confirm what @Critter-3 has posted, that the IRS never actually receives the mortgage balance/origination data but only the deduction amount on the Schedule A.

They get the data from the form issuer  not the taxpayer.  All the messy entering in the program is simply to apply the limits ... so if you know you are below the limits you can bypass all the foolishness.   LOOK at the Sch A ... note they ONLY get a total on line  8a. 

My question is why is TurboTax sending me 5 emails a day to complete my taxes and not proactively indicating that it has flawed logic and can't accurately complete my returns? I wasted hours yesterday messing with the 1098s assuming that the poorly worded interview questions were resulting in a problem, not a technical issue with the software. Agree an ETA would be nice...

Yep just looked but you would think given how many people refinanced multiple times in 2020, TT would have had this tested and working properly or at least had the issue resolved when users first started reporting the issue, this seems to be a carry over from last year also.  Kind of disappointing as isnt this what we are paying them for???

Totally agree Jason, I have messed around with this for way too long, went over to TaxAct and they had no issue at all but given I have always use TurboTax was trying to avoid carry over issues.  

I refinanced 2 mortgages (my home and my 2nd home both no cash out).  TT is limiting the amount of interest which is preventing me from itemizing and forcing me into the standard deduction.  My total mortgage debt was under $575.000 before and after the refis and I took no cash out.  I have wasted several hours trying to see if I was filling the forms out incorrectly.  The worksheets ask questions that are not addressed Easy Steps.  Maybe they don't have to be answered in all cases but it is hard to do your taxes if TT can't even do your itemized deductions!!

I received an email today that the "glitch" has been fixed. I tried entering my 1098s answering the questions as written as well as using the illogical responses provided above and sill run into the same problem - my deduction is limited even though I never had a mortgage balance that exceeds $750k. When will TurboTax fix this problem?

If you choose to move forward with your return and if you have a mortgage debt that is below $750,000, (or $1M for grandfathered debt incurred on or before December 15, 2017) this means all of the mortgage interest would be allowed to be used on your itemized deductions as long as there was no cash taken out that was not used on the home (all borrowed funds were used to buy, build or improve the home). 

If this is your situation then enter the mortgage debt for Form 1098 with the current lender, and then enter $1 or $0 for the second or former lender in that Form 1098. This will provide the correct amount of allowed mortgage interest deduction.

You may want to delete them first to begin again and also clearing your cache and cookies is a good ides (regularly).

Here's how to enter your mortgage interest statement in TurboTax:

1. With your return open, search for 1098 and select the Jump to link in the search results.
2. Follow the instructions to enter your 1098 info.

Thanks Diane - appreciate the help but find that answer a bit unsatisfactory. I pay for the value that TurboTax is supposed to deliver by easing the tax filing process. If I have to use workarounds to get TurboTax to work correctly, why should I have confidence that other areas are also correct when I don't have enough knowledge of the tax code to "find" TurboTax's problems?

What if we rolled the refinance costs into the new principal balance? It seems that per other posts that the interest is only deductible up to the principal balance of the original acquisition debt at the time of refinance. For example, if the original balance was $710,000 at refinance time, and $5,000 of costs were rolled into the new principal of $715, 000, how do we adjust for the interest on the $5,000 incremental (disallowed) principal balance in TurboTax?

Yes.   you should adjust your Mortgage Interest deduction to exclude the closing cost, that are rolled into the refinancing.

As per IRS publication 530, homebuyers may deduct certain closing costs when they file federal tax returns. These include the points, or loan origination fees, you paid, as well as property taxes and mortgage interest. The IRS considers points as prepaid interest, thereby permitting deductibility.  IRS Publication 530 For Home Owners

Thanks, so does that mean I should calculate the % of the mortgage that relates to the increase and reduce the mortgage interest but that amount? If so, do I need to check the "not as reported on 1098" box?

Additionally, once we refinanced, our mortgage was sold, so we have 3 1098's. I see some conflicting guidance in the FAQ's - some say combine all as one, using the original balance, and some say use whichever lender holds the mortgage as of the end of the year - do you all suggest to load all 3 separately? Or as one combined using the ending lender's name and principal balance (while checking box 11 for the purchase date)?

On your "Federal Taxes" - "Deductions and Credits" page, once you've navigated yourself to the page titled "Let's get the details from your "XYZ" 1098" - you will see at the very bottom the hi-lighted phrase "Multiple 1098s due to a refinance done in 2020". Click on this and follow the instructions as stated in order for the system to properly calculate your multiple 1098s.

I've read those instructions, but they don't a) address how to make the adjustment for the amount above the original principal balance and b) if 2,3,7, and 11 use the original mortgage, than it won't be identified as having been refinanced - is that correct?   One of the other posts said to use the ending/latest mortgage lender.

TurboTax was (is?) calculating refinances incorrectly. This thread is related to an issue where when you have more than one 1098, TurboTax incorrectly adds all mortgage balances together and incorrectly limits your deduction. If you don’t know what you can deduct/not deduct, you shouldn’t use TurboTax. If you do, adjust your entries until you get the correct deduction. 

In answer to your questions:

a)  How do you make the adjustment for the amount above the original principal balance?

You need to add together the amounts in box 1 from each 1098 form as well as box 5 and the property taxes that you paid.

b) if 2,3,7, and 11 use the original mortgage, than it won't be identified as having been refinanced - is that correct?   

Yes, that is correct.

Step-by-step

If you refinanced last year, you’ll have a Form 1098 from your previous lender and one from the lender you refinanced with. You’ll need both forms. 

Follow these steps to enter your mortgage information:

1. Gather all of your 1098 forms related to your refinance (the form from your original lender and the form from your new lender)
2. Grab a calculator and add together the box 1 amount from each form. Enter the total in TurboTax as Box 1 Mortgage interest.
3. Add the Box 5 amount from each form and enter the total as Box 5 Mortgage insurance premiums. (If you weren’t required to pay mortgage interest, these boxes will be blank on your forms and you won’t enter anything.)
4. Add the property tax paid from each form and enter it in the Property (real estate) taxes box.

Next, finish adding info for boxes 2, 3, 7, and 11 using Form 1098 for the original loan.

@mpinne