I refinanced and have two 1098 forms

[Kkulkev21]

I had same problem as yours. I received three 1098 forms. Two were from same bank (original loan and refinance) and the third one from the 2nd refinance (with a different bank). When I entered all 3 on Turbotax separately, I noticed I was getting less CA refund because all my mortgage balances were being added up. Even though my loan balance was always less than 400K, the worksheets were showing 3 different loans. Not only that, on the federal and California schedule A forms, the mortgage interest from my 2nd refinance was not even counted. 

So, after scouring the forums for answers, I finally figured out the best work around for this problem. So, on my Mac desktop version on TT I first entered all three 1098 forms beginning with the oldest 1098. Then I went to the forms and manually changed the worksheets. 

1. For my original loan, I entered the date loan was paid off and entered the ending balance as 0.

2. I did the same for my 1st refinance.

3. On my second refinance, I just entered the ending balance on the worksheet. 

Now when I looked at the Schedule A from Federal forms and CA forms, the total interest calculated is accurate and I am getting full deduction for it on CA refund.

Also, on CA deductions worksheet, now it’s showing only 1 active mortgage and 2 are closed out with exact delineation of whether the loan is original or refinance and whether loan is from before or after 2017. The average of the loans does look wonky but it’s just on worksheets and don’t think will be passed on to IRS.

Others can chime in whether this is acceptable workaround.

[LinaJ2020]

I will recommend you to combine all 1098 forms and enter as one.  I am attaching a TurboTax link for the instructions how to do so.  Click here:

Multiple Form 1098s

For tax years prior to 2018, your mortgage interest deduction is generally limited if all mortgages used to buy, construct, or improve your first home (and second home if applicable) total more than $1 million ($500,000 if you use married filing separately status). Beginning in 2018, this limit is lowered to $750,000.  For more information about the mortgage interest deductions, click here: Mortgage Interest deduction

[dan971]

You must be looking at the instructions for 1098 tax year 2021. For 2020, box 2 would be the principal  on Jan 1, 2020 (or origination date).

[dan971]

My previous post is in response to those that say to put 0 in box 2 for loans paid off. That is NOT correct.

This is really troubling that Turbo Tax does not handle this situation correctly. I'm glad I noticed turbotax was not calculating my itemized deductions correctly, but I wonder how many people did not notice. But I've wasted too much time on this - what's the point of using turbotax if I can't trust it?

[mhaanraadts]

Same for me. Refinanced in NYS, received two 1098 forms. New York State returns indicated that I have over a million dollars in mortgage loans. Yeah right.

I recommend Kkulkev21's approach by:

- Use the normal view by entering all 1098s, oldest first

- Enter Forms mode and manually edit the original loans by added the original loan close date and 0 open balance

Now NYS looks good.

I do NOT recommend combining the 1098s by manually adding up the numbers. That's asking for trouble since your return won't match the 1098s.

TurboTax, you got to get your act together here. This should be an easy software fix.

[JamesG1]

Some TurboTax customers are experiencing an issue with their home mortgage average balance. This can cause the home mortgage interest to be incorrectly limited.  This may be affecting your tax return.

Please sign up for email notifications when an update related to this issue is available.

See this TurboTax Help.

[GoneSailin74]

“customers are experiencing an issue with their home mortgage average balance.”

correction:

TurboTax is incorrectly calculating mortgage refinance tax data resulting in incorrect tax values for tax year 2019 and 2020.

[sx-70118]

Looking forward to a solution to this! 

[JohnB5677]

Some TurboTax customers are experiencing the following error message when running the Federal Error Check 

Check This Entry: Tax and Interest Deduction Worksheet: Limited Interest and Points must be entered

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

As a work around  you can consolidate the 1098's and get an accurate result.

• Total all of the Box 1 Mortgage Interest received .
• Use the entry in Box 2 Outstanding Mortgage Principal from the most recent mortgage.
• Total all of the Boxes 3,4 & 5
• Enter only the most recent mortgage points for Box 6.  (Any previous points will be deducted when those mortgages were closed.) 

[mhaanraadts]

I don’t understand why you recommend to combine the forms, since the result doesn’t match the individual 1098.

The proper way and advise is to switch to “forms” mode and make the adjustments manually. It might be mor le complicated but it’s more accurate.

[GoneSailin74]

This is still broken in the desktop application version 2020.r16.037. 

I just added both form 1098's for a refinanced loan, and my refund went down by thousands of dollars for a no cash out refinance. This is broken.

This is also going to be problematic for people that have loans governed by the mortgage deduction limits, or are grandfathered. TurboTax doesn't look like it'll handle this well at all.

I went to forms view, but can't figure out where the background calculation for the mortgage deduction is done. The number entered in 1040 Schedule A doesn't seem to come from either of the 1098's. It also isn't the sum of the values in 1098. It isn't clear how it's being calculated, but it is clearly lower than it should be.

[JohnB5677]

Some TurboTax customers are experiencing the following error message when running the Federal Error Check 

Check This Entry: Tax and Interest Deduction Worksheet: Limited Interest and Points must be entered

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

As a work around  you can consolidate the 1098's and get an accurate result.

• Total all of the Box 1 Mortgage Interest received .
• Use the entry in Box 2 Outstanding Mortgage Principal from the most recent mortgage.
• Total all of the Boxes 4 & 5
• Enter only the most recent mortgage points for Box 6.  (Any previous points will be deducted when those mortgages were closed.) 

[GoneSailin74]

So, I can just ignore the issues of refinancing a loan making it subject to TCJA limitations by saying I only have one loan?

Is this advice guaranteed by Audit Defense?

[Dallasdave]

turbo tax is adding "outstanding mortgage principle" amounts from all Form 1098s received causing my overall mortgage balance to exceed $750,000. How can I correct this issue?

[LinaJ2020]

Here is the workaround:

If you have more than one 1098 form, I will recommend you to combine all 1098 forms and enter as one. I am attaching a TurboTax link for the instructions how to do claim your mortgage interests.  Click here:

Multiple Form 1098s

For tax years prior to 2018, your mortgage interest deduction is generally limited if all mortgages used to buy, construct, or improve your first home (and second home if applicable) total more than $1 million ($500,000 if you use married filing separately status). Beginning in 2018, this limit is lowered to $750,000.  For more information about the mortgage interest deductions, click here: Mortgage Interest deduction