I moved in 2021. The old mortgage was smaller, pre-2018 and $1mm . The new mortgage is larger and $750K . TT is spreading all interest across mortgage 2. How do I fix?

[aspark-659]

There are two errors here that is causing my write-off and refund to be lower than it should be.  First, interest on the old mortgage is being spread across the new mortgage balance which is diluting how much I can write off.  Second, interest on the old mortgage is being capped at $750K when it should be $1mm.

[DianeW777]

Due to the issue with the maximum loan amounts it's important that all the information is entered as you go through the mortgage interest (Form 1098) screens. I'm not exactly sure of your total loan amounts so I will share my example with the information I entered. TurboTax does come back around to ask questions about the mortgages after the initial entry.

1. Enter 1098-1 for the home that was sold
   1. Loan is secured by the property
   2. It is the primary home
   3. No points were included in my example
   4. Yes this was most recent loan
   5. Yes this was the original loan
2. Enter 1098-2 for the new home after moving
   1. Enter the acquisition date
   2. Loan is secured by the property
   3. It is the primary home
   4. No points were included in my example
   5. Yes this was most recent loan
   6. Yes this was the original loan
3. Both Forms 1098 'Needs Review'
   1. Select each one and answer the questions 
   2. For the first loan taken out before December, 2017 answer Yes and fill in the date you purchased the property secured by this loan.
4. See the images below for assistance.  

Please update if you need further assistance. Also see the worksheet in IRS Publication 936, page 12. If necessary you can complete this worksheet, then enter the correct total mortgage interest.

[aspark-659]

Thanks for this but I still ended up with a miscalculation.  A few things:

• Both my loans are above the cap.  Maybe you can assume the first loan is $2mm and the second is $3mm to make it simpler
• Loan 2 doesn't have an acquisition date.  Just an origination date.

For Loan 1, I did everything as you instructed except for 5 because it was a refi with no cash out.  It was originated in 2017 so I don't believe this should change anything.

For Loan 2, sorry to add another wrinkle, but Loan 2 was also refinanced with Loan 3 during the year but it was for the same amount (so assume $3mm again).  So 

• Loan 2 was
  1. No acquisition date - it was blank
  2. Loan is secured
  3. Primary home
  4. No points
  5. No to most recent loan
• Loan 3 was 
  1. Entered acquisition date
  2. Loan is secured
  3. Primary home
  4. No points
  5. Yes to recent
  6. No to original, yes to refi and no to cash out. 

Turbotax seems to be taking the total interest from all three loans and dividing it by $3mm (the newest loan) and capping it at $750K (also just the newest loan).  Instead I believe the interest on Loan 1 should be

1. Divided by $2mm, giving me credit for more interest to be deducted and
2. Capped at $1mm, further giving me credit for more interest to be deducted

Thanks again for your help.

[AmyC]

Loan 1 capped at $1M since before Dec 15, 2017

Loans 2 & 3 are on a new house, 2021, capped at $750,000 total.

Publication 936 (2021), Home Mortgage Interest Deduction - IRS with worksheets included.

The worksheet does not go to the IRS, only the final answer on sch A. Feel free to change the worksheet to get the correct totals on sch A.

[aspark-659]

I would like to see how TurboTax is filling out this schedule.  I don't think it's correct and I want to be able to manually change it.  

[AmyC]

Yes, you do want to see the forms. We are waiting on tech to resolve the issue but you can certainly go ahead with the correct numbers we discussed earlier. To see the forms: 

Desktop: switch to Forms Mode

Online: You may need to go ahead and pay for the return so you can see the actual forms to find the issue. To do this:

1. look on the left sidebar,
2. select tools
3. select print center
4. select pay now
5. Select Print, save or preview this year's return