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Tiberius37
Returning Member

Is home equity interest deductible for New York State? My turbotax return shows a 0 for IT-196 line 10 even though I paid $2513 in interest on my LOC, balance ~$45000?

 
12 Replies
RobertG
Expert Alumni

Is home equity interest deductible for New York State? My turbotax return shows a 0 for IT-196 line 10 even though I paid $2513 in interest on my LOC, balance ~$45000?

It depends.

 

Here is what it says in the NY State Instructions for Form IT-196:

 

For federal income tax purposes, the itemized deduction rules for the interest you paid in tax year 2018 have changed from what was allowed as a deduction for tax year 2017. Your New York itemized deduction for the total interest you paid on line 15 is computed using the federal rules that applied to tax year 2017.

 

See the 2017 federal Schedule A instructions, available on our 2019 New York itemized deductions webpage for information on computing your New York itemized deduction if either 1) or 2) below applies. If you had more than one home at the same time, the dollar amounts in 1) and 2) apply to the total mortgages on both homes.

 

1) You, or your spouse if filing jointly, took out any mortgages after October 13, 1987, and used the proceeds for purposes other than to buy, build, or improve your home, and all of these mortgages totaled over $100,000 at any time during 2019. The limit is $50,000 if married filing separately. An example of this type of mortgage is a home equity loan used to pay off credit card bills, buy a car, or pay tuition.

 

2) You, or your spouse if filing jointly, took out any mortgages after October 13, 1987, and used the proceeds to buy, build, or improve your home, and these mortgages plus any mortgages you took out on or before October 13, 1987, totaled over $1 million at any time during 2019. The limit is $500,000 if married filing separately.

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Tiberius37
Returning Member

Is home equity interest deductible for New York State? My turbotax return shows a 0 for IT-196 line 10 even though I paid $2513 in interest on my LOC, balance ~$45000?

Thanks for the reply.  I saw those instructions in the NYS documentation  for IT-196.  Since my balance was well below $100,000 for all of 2019 (married filing jointly) it doesn't seem that my deduction should be limited.

ReginaM
Expert Alumni

Is home equity interest deductible for New York State? My turbotax return shows a 0 for IT-196 line 10 even though I paid $2513 in interest on my LOC, balance ~$45000?

Your mortgage interest should not be limited on the State of New York Return.  I tried to duplicate your limitation on your State of New York return and could not.

 

You may want to verify that your 1098 (mortgage interest) is correct in TurboTax by following these steps:

  1. While in your Tax Home,
  2. Select Search from the top right side of your screen,
  3. Enter 1099-Int,
  4. Select Jump to 1099-Int,
  5. Follow the On-Screen Prompts to review this section.
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Tiberius37
Returning Member

Is home equity interest deductible for New York State? My turbotax return shows a 0 for IT-196 line 10 even though I paid $2513 in interest on my LOC, balance ~$45000?

Hi and thanks.  I reviewed the 1098 info and everything looks right.  Turbotax is still showing a 0 for my home mortgage deduction on my NY taxes.

Tiberius37
Returning Member

Is home equity interest deductible for New York State? My turbotax return shows a 0 for IT-196 line 10 even though I paid $2513 in interest on my LOC, balance ~$45000?

The hang up seems to be if the LOC funds were used to improve my house.  The truthful answer is no, which is how I answered the question in Turbotax.  This limits my deduction for federal taxes, but according to the NYS instructions, the deduction is only limited if the balance exceeds $100,000 which it does not.  If I answer yes to the question of using the money for home improvements, then Turbotax gives me the deduction for BOTH federal and NY.  But this is not correct.  

 

It's entirely likely that I'm missing something on this, so if so please set me straight.  If I'm right in my reading of the rules, then how do we fix this?

Tiberius37
Returning Member

Is home equity interest deductible for New York State? My turbotax return shows a 0 for IT-196 line 10 even though I paid $2513 in interest on my LOC, balance ~$45000?

I'm having the same issue on my 2020 return.  Below is my follow-up post from April, 2020 to which I never got a response:

 

 
 

The hang up seems to be if the LOC funds were used to improve my house.  The truthful answer is no, which is how I answered the question in Turbotax.  This limits my deduction for federal taxes, but according to the NYS instructions, the deduction is only limited if the balance exceeds $100,000 which it does not.  If I answer yes to the question of using the money for home improvements, then Turbotax gives me the deduction for BOTH federal and NY.  But this is not correct.  

 

It's entirely likely that I'm missing something on this, so if so please set me straight.  If I'm right in my reading of the rules, then how do we fix this?

 

Is there any further guidance on how I can get Turbotax to give me the deduction on my New York return?

LenaH
Employee Tax Expert

Is home equity interest deductible for New York State? My turbotax return shows a 0 for IT-196 line 10 even though I paid $2513 in interest on my LOC, balance ~$45000?

Per the IRS, interest on home equity loans and lines of credit are deductible only if the borrowed funds are used to buy, build, or substantially improve the taxpayer’s home that secures the loan. The loan must be secured by the taxpayer’s main home or second home (qualified residence), and meet other requirements. 

 

IRS Publication 936 (page 2)

 

@Tiberius37

 

[Edited 4/5/21 l 12:24PM PST]

Tiberius37
Returning Member

Is home equity interest deductible for New York State? My turbotax return shows a 0 for IT-196 line 10 even though I paid $2513 in interest on my LOC, balance ~$45000?

Thanks for the response.

 

According to NY instructions for form IT-196, the limitations only apply if the total of the loan is greater than $100,000, which in my case it is not.  It seems like TurboTax should give me that deduction for my NY return.  

 

Or am I missing something else?

DaveF1006
Employee Tax Expert

Is home equity interest deductible for New York State? My turbotax return shows a 0 for IT-196 line 10 even though I paid $2513 in interest on my LOC, balance ~$45000?

No.  Unfortunately, New York State law conforms with federal law regarding income and deductions. Lenah has correctly stated that "The state of New York uses the amount of your mortgage interest that is deducted on Schedule A of your 1040." 

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Tiberius37
Returning Member

Is home equity interest deductible for New York State? My turbotax return shows a 0 for IT-196 line 10 even though I paid $2513 in interest on my LOC, balance ~$45000?

Thanks again for the responses.  I'm not seeing that statement you quoted in any of my New York state instructions.  The opening statement in IT-196i says "Beginning with tax year 2018, you can choose to itemize your deductions for New York State income tax purposes whether or not you itemized your deductions on your federal income tax return."  And then the specific instructions for the home mortgage deduction doesn't read as you quoted.  

 

Can you pinpoint where in the NY tax instructions you are quoting from?

LenaH
Employee Tax Expert

Is home equity interest deductible for New York State? My turbotax return shows a 0 for IT-196 line 10 even though I paid $2513 in interest on my LOC, balance ~$45000?

For federal purposes, the itemized deduction rules for home mortgage and home equity interest you paid in 2020 have changed from what was allowed as a deduction for tax year 2017. For New York purposes (Form IT-196, lines 10 and 11), these changes do not apply. 

 

For specific information, see:

  • 2017 federal Schedule A instructions for lines 10, 11, and 12
  • 2017 IRS Publication 936Home Mortgage Interest Deduction
    • page 9, Limits on Home Mortgage Interest Deduction
  • 2020 federal Schedule A instructions for line 9 (not yet available)

I have attached Figure A and Worksheet from the 2017 IRS Publication 936. 

 

Besides the HELOC, how much was the highest principal amount of your mortgage during the year? This will also determine the limitation of mortgage interest deduction. 

 

@Tiberius37

 

 

Tiberius37
Returning Member

Is home equity interest deductible for New York State? My turbotax return shows a 0 for IT-196 line 10 even though I paid $2513 in interest on my LOC, balance ~$45000?

Yes, having gone through those instructions per the NY It-196i, since my balance was under $100,000 for all of 2020 (actually it was under $40,000), it seems like the interest should be deductible on my NY return.

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