I paid mortgage interest over 40000 in 2020 and my loan balance is about 1,050,00, why I only get 14000 deductible?

[weidongh73]

I would expect roughly 30000 deductible (40000 * 750000/1050000). I refinanced this loan twice in 2020.

Some how, the refinance was treated as a separate loan so my loan principal is doubled (around 2 million) and I got the 40000 * (750000 / 2100000) ~= 14000.  This significantly reduces my return.

Also, when computing the months for a loan, you should use 1098 box 11 (acquisition date) instead of box 3 (origination date).

[Carl]

You can only deduct mortgage interest on the first $750,000 of the outstanding balance on SCH A for a mortgage loan established after Dec 15, 2017. That's it.

See IRS Pub 936, "Home Acquisition Debt Limit" on page 10 at https://www.irs.gov/pub/irs-pdf/p936.pdf#en_US_2020_publink1000229992

[weidongh73]

I knew that but my total mortgage is only 1,050,000 so I should be able to deduct about 750000/1050000 ~= 74% of my total mortgage interest which is about 28000 but I only get 14000.

My outstanding balance on SCH A should be 1050000 but some how when I used turbo tax to enter the 2 loans (one is original loan and the other is refinance), it added up the balance for both loan so my outstanding balance on SCH A became 2100000 (doubled).  The computation is wrong when there is refinance happened during 2020.

I looked into the pdf version and here was what I got:

Loan 1	Loan 2	Loan 3	Loan 4
14900	24,546.
07/24/2019	02/27/2020
2	11
6000	1200
Yes No X	Yes No X	Yes No	Yes No

Yes No

1070000.
	1,064,000
6000	12000
1070000	1064000
1064000	1052000
1067000	1058000

The loan2 is the refinance loan to replace loan 1.  My understanding is my outstanding balance should be computed based on the months the loans outstanding.  The total mortgage outstanding should be = (1067000 * 2 + 1058000 * 10) /12 = 1059500.  But I got 1067000 + 1058000 = 2125000 (almost double).  

[NCperson]

as long as you did not cash out refi; just add the two 1098's together.

technically, the average of each loan is the interest paid / the interest rate; then add the results together for the two mortgages to get the average balance for the year.. 

see publication 936, page 13 in the middle column 

https://www.irs.gov/pub/irs-pdf/p936.pdf

your result should be about what you are expecting, regardless of what TT says 

[weidongh73]

Thanks for the reply.  So how do I add 2 1098 together via turbo tax?   

Is turbo tax not working for refinancing?  Can this be fixed? 

I really don't want to manually change the tax return and mail it through USPS.  

[Carl]

I would think that provided you refi'd and did not cash out, you would only need to enter the box 2 amount from the 1098, for the original 1098 and just leave it blank for the 2nd 1098.

If the refi was with the same lender, then I would think you can just add together the box 1 amounts, and enter information for the other boxes, only from the first, original loan 1098. Now I haven't taken into account any points that may have been paid on the refi, with that comment.

[weidongh73]

Thanks. That works for me.