I refinanced mortgage in 2020. Turbotax tells me to add the interest together for each 1098. Itemized deduction then show $5k more in interest than I actually paid. Help?

[morganpyoung]

TurboTax has strange directions if you refinanced.  Not sure why my interest on my 1040 appears as $5k more than I paid.

[JohnB5677]

That does sound strange, but I'd like to provide an alternative.

If you've refinanced or had your mortgage lender changed, the outstanding mortgage principal listed in the combined total of them on Line 2 of the 1098 will be too large.

When you put an outstanding balance in both forms, then the program adds them together and if that number is greater than $750k, then it puts you in the category to "limit interest".

To get that to go away, you need to go back to the deductions section and click on "edit" mortgage interest statement. Enter both 1098's.

Change the line 2 of the mortgage that you no longer owe on (like the one that you refinanced and paid off) to a 0 (zero) because you have refinanced out of that loan and no longer have an "outstanding mortgage principal".

In this way it should result in the correct interest payment.

[morganpyoung]

If I make my “Outstanding Mortgage Principle” (Box 2 1098) $0 because I paid it off, I get an error when I try to file and TurboTax asked me to put in a figure.  I am confused why the 1098 mortgage refinance instructions say this:

1. Gather all of your 1098 forms related to your refinance, e.g. the form from your original lender and the form from your new lender.
2. Grab a calculator and add the amount in Box 1 Mortgage Interest from each form and enter the total here as Box 1 Mortgage Interest.