Itemized Deduction

[JamesT1]

Dear TurboTax Community,

I have similar home mortgage interest payments and property taxes (and other itemized deductions) for tax year 2020 and 2021, but when I use Turbo Tax 2021, it chooses the standardized deduction instead of itemized deduction like it did last year.  Has the law changed?  Thank you for your help.

[macuser_22]

No, the 2021 law is the same as 2020.

You might not have enough deductions to exceed the standard deduction.

For  many taxpayers that itemized in the past will find that they can no longer itemize because the standard deduction has doubled so all of their itemized deduction s no longer exceed the standard deduction.

Only if all itemized deductions exceed the standard deduction will it be of benefit.

Not all itemized deductions count the full amount. Medical expenses are reduced by 7.5% of AGI so if your AGI is $30,000, for example, then only medical expenses more than $2,250 would be an itemized deduction.

The 2018 tax law also caps the total of Sales tax OR State and local income tax, Property (real estate and personal property) taxes at $10,000.

Mortgage interest on loans after Dec 16, 2017 may be limited.

The Mortgage must be secured by the property to qualify.

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.

You can check the actual amount of itemized deductions by using the Search Topics for "itemized deductions, choosing" (under "My Account, Tools" in the online versions). Click on "Change my deduction". That will display the actual amount of itemized deductions vs. the standard deduction. (Be sure to uncheck "Change my deduction" after checking it so you do not lock in the wrong deduction.


2021 standard deductions

$12,550 Single
$18,800 Head of Household
$25,100 Married Jointly

Add an additional $1,700 for over age 65 or blind

[JohnB5677]

There is no significant change in tax deductions from 2020 to 2021.

Since we can't see your return it is difficult to analyze your deductions.

Tax deductions you can itemize

• Mortgage interest of $750,000 or less
• Mortgage interest of $1 million or less if incurred before Dec. 16, 2017
• Charitable contributions
• $250 (for educators buying classroom supplies)
• Medical and dental expenses (over 7.5% of AGI)
• State and local income, sales, and personal property taxes up to $10,000
• Gambling losses
• Investment interest expenses
• $2,500 in student loan interest (these do not need to be placed on Schedule A but can be taken above the line and subtracted from your taxable income); income phaseout limits apply

[JamesT1]

Thank you for your answer.  I was a bit confused because my home mortgage interest payments are ~11,000 and my property taxes are  ~6000, and Turbo Tax for some reason only counts 6,700 as my itemized deduction.  Am I missing something?

[DawnC]

State and local taxes are limited to 10,000, so $6K is not going to cause an issue (unless you are filing MFS?).    Your mortgage interest deduction is probably not correct.   You can deduct interest on debt up to $750K.   Did you refinance or have multiple 1098 forms entered?    You should have a Deductible Mortgage Interest Worksheet included in your return that will show how TurboTax calculated your average mortgage balance to calculate your deduction.   Look over this FAQ (and the refinance FAQ included there) along with the worksheet - there is probably something that needs correcting on your worksheet.  

The IRS lets you deduct your mortgage interest, but only if you itemize deductions. You can't deduct the principal (the borrowed money you're paying back).  In addition to itemizing, these conditions must be met for mortgage interest to be deductible:

• The loan is secured, which means the lender has some kind of guarantee of payment, usually in the form of property. If a borrower defaults on payments, the lender can seize the property that’s securing the loan. If you’re buying or refinancing a home, especially if it’s your first home, the loan is usually secured by the home you’re buying or refinancing.
• The home with the secured loan must have sleeping, cooking, and toilet facilities.
• The debt can’t exceed $750,000 (or $1,000,000 if the loan was taken before December 16, 2017) to get the full deduction.
• You or someone on your tax return must have signed or co-signed the loan.
• If you rented out the home, you must have used the home more than 14 days during the tax year or 10% of the number of days you rented it out, whichever is greater.

[JamesT1]

Hi @DawnC ,

Thank you for your reply.  I didn't file Married Filling Separately or have multiple 1098 forms to enter, so I think the deduction is off.  Maybe I entered multiple 1098 forms by accident when I moved back to check/edit numbers?  I wondered if there was a way to reset and reenter the mortgage interest deduction section on the desktop version of the software.  Thanks again for your help.

[AnnetteB6]

You can revisit the mortgage interest section of your return and delete the entries you have made so that you can start that section again.

Use these steps:

• On the top row of the TurboTax online screen, click on Search (or for CD/downloaded TurboTax locate the search box in the upper right corner) 
• This opens a box where you can type in “mortgage interest” (be sure to enter exactly as shown here) and click the magnifying glass (or for CD/downloaded TurboTax, click Find)
• The search results will give you an option to “Jump to mortgage interest”
• Click on the blue “Jump to mortgage interest” link 

This will take you to a summary page showing all the entries you have made.  Select Delete beside each one if you want to start again.

@JamesT1