How do I enter mortgage interest was loan sold by lender within one e month of closing?

[djholguin]

The loan was for $700k. I have two other loans. One opened in 2021 for 265k and one for a property sold in 6/2022 for $450@k.  Turbo tax is recording the 700k as if I have 2 loans for that amount thus severely limiting my mortgage interest deduction.

[HopeS]

This depends on whether or not you refinanced your loan and received a new loan or you sold your home and purchased a new one. 

if you have refinanced your home, it is normal that you have received two forms 1098, one from each loan.

You'll need to enter both 1098 forms on your tax return. In TurboTax, to enter these forms 1098, please follow these steps:

1. Click on Federal Taxes
2. Click on Deductions & Credits
3. Under All Tax breaks, locate the section Your Home and click on Show more
4. Click Start next to Mortgage Interest, Refinancing, and Insurance (see screenshot 1)
5. Follow the interview and enter your first form 1098
6. Click Continue at the end of the interview
7. You will be brought back to the Mortgage deduction Summary page
8. Click on Add a Lender
9. Follow the interview and enter your second form 1098.

The 1098's should have an Origination Date in Box 3 which should differentiate an Original Loan 1098 from a Refinanced Loan 1098, so the loan balances would not be added together.  When entering your original loan 1098, DON'T indicate 'this loan has been refinanced' (even if it has).

When you enter your Refinanced Loan 1098, indicate YES this loan has been refinanced.  You will then be able to indicate whether the entire loan amount was to 'buy, build or improve' your main home or you took CASH OUT in addition to refinancing the old loan (screenshot).

If on the other hand, you sold one home and purchase a new home you can still deduct home mortgage interest, real estate taxes, points, etc paid on your purchased home. You will also take similar deductions on the original home that was sold. 

The sale of your home is reported only if you have a taxable gain or received Form 1099-S. Please use the steps below to report it; Turbo Tax will determine if you have taxable gain:

1.  Wages and Income, Jump to the Full list

2. Select Less Common Income

3. Select Sale of Home (see screenshot below)

Note: individuals can exclude up to $250,000 ($500,000 if Married filing jointly) of gain on the sale of a home if three provisions are satisfied:

1) Ownership. The individual owned the home for at least two years during the 5-year period ending on the date of sale,

2) Use. The individual used the home as a principal residence for at least two years during the 5-year period ending on the date of sale, and

3)The individual did not exclude gain from the sale of another home during the 2-year period ending on the date of sale.

 See the steps below:

[Edited 02/3/3023 6:31am PST] @djholguin

[djholguin]

I wasn't clear. We took out a mortgage for $700k. The mortgage holder sold the loan to another lender. We received two 1098's for the loan. Both list the outstanding balance as $700k. When I enter the info into TurboTax it calculates the average balance on both 1098's instead of just one. Can I leave the balance off of the original 1098 and only list it on the current lender and most recent 1098?

[PattiF]

Please follow these instructions found in a TurboTax Help article on how to enter the information when your mortgage was sold if you have forms from both mortgage holders:

You will enter the information on the 1098s exactly as shown.

Enter the original (sold) loan first

1. Sign in to TurboTax and select Pick up where you left off or Review/Edit under Deductions & Credits.
2. Select Show more next to Your Home and Start or Revisit next to Mortgage Interest and Refinancing (Form 1098).
3. Answer Did you pay any home loans in 2022? and Continue.
4. You can either sign in to your financial institution and import your 1098 forms, or select Change how I enter my form.
5. Next, you can either upload a digital copy or Type it in myself.
6. Continue through and be sure to enter this 1098 exactly as it appears.
7. Answer the questions, and when you get to the Let's see if this is the most recent form for this loan screen, answer No to Is the 1098 you're working on now the most recent for your loan?.
8. On the next Let's get some details about this loan screen, answer Yes to Is this the original loan you used to buy your property?
9. Select Continue to be taken back to the Your 1098 info so far screen.

Then enter the 1098 for the new loan

1. On the Your 1098 info so far screen, select Add another 1098 and continue through to either import or enter your information manually.
2. Answer the questions accordingly and complete your 1098 info exactly as it appears on your form.
3. On the Let's see if this is the most recent form for this loan screen, answer Yes to Is the 1098 you're working on now the most recent for your loan?
4. On the next Let's get some details about this loan screen, answer Yes to Is this the original loan you used to buy your property? Even though the loan is with a new lender, it's still considered the original loan for this calculation.
5. When you're all done, you'll see both your forms on the Your 1098 info so far screen. You can Continue through to finish and file your return.

@djholguin