How to Enter Cash Out Refinance? (2021)

[poeinator]

Scenario:

• Cash out refinance in 2021
  • Original loan had a balance of $300k
  • Refinanced for $450k ($150k cash back)
• Received 2 1098's (original mortgage and refinance mortgage)
• Cash received during the refinance was not used for improvements to home (used for other things)

In TuboTax, on the refinance 1098, I answered yes to:

• Is this loan a home equity line of credit (HELOC) or a refinance of a previous loan?
• Did you take cash out when you got this loan?

Then on the question "Have you used the money from this loan exclusively on this home?" answered:
"No, I used some or all of this loan on a different home or something other than a home."

I am now confused what to enter on the following items:

• What was the original amount of the loan?
  • Should this be the original loan payoff of $300k or the refinance loan amount of $450k?
  • When I entered the refinance loan amount of $450k, it said the interest wasn't deductible. Seems like the form questions aren't really entirely accurate.
• How much of your loan did you use to build, remodel, or repair the property it's secured by?
  • Since I did not "build, remodel, or repair", I assume this should be zero.
  • In other discussion posts, I've seen mention of "buy, build, or improve". Did "buy" get erroneously dropped from the question text and I should enter $300k here?

Can a tax expert please provide guidance?

[DMarkM1 · Accepted solution]

First I recommend deleting all the forms 1098s and start with a clean slate.  

Next enter the original loan 1098 and be sure to answer "No" this is not the latest (most current) form 1098.  

Then enter the current loan 1098.  Answer "Yes" this is the most current 1098.  Answer to indicate it is a refinance and you cashed out and didn't use all the cash on the property. 

The amount for the top box "Original Loan" should be $450,000 (from box 2 on the form 1098).  The middle box is the amount used to buy, build. improve the property and should be $300,000 used to pay off the original loan.  The bottom box is the balance at the end of the year 31 Dec 2021 or 1 Jan 2022 depending on your statements.  

[poeinator]

Thanks @DMarkM1 ! That's what I suspected.

It would be great if the Turbo Tax team could correct the label on:

"How much of your loan did you use to build, remodel, or repair the property it's secured by?"

As you mentioned, "buy" is the keyword in the case of the refinance ("buy, build, improve"). Might be good if the team could also update/extend the help text on those fields.

Thanks again!

[Dhokama]

How can I review my 2021 filing. 
I tried doing a revision to view my filing. I hope It did not effect my filing. No changes were made.

I did not get to view what I wanted

[DMarkM1]

After filing your return no changes made in TurboTax will affect that tax filing.  You can however amend that return later, but you will actually have to efile or mail in the amended return for it to affect your tax account with the IRS or state tax agency.  

To view your return after filing sign in to your TurboTax account and either: 

• select Preview or print return if your return has been accepted, or
• Scroll down to Your tax returns & documents (select Show if needed) and select Download/print return (PDF).

Here is a link with more details if needed.