Mortgage 1098 Taxes Owed Increasing

[dweisman0513]

I refi'd this year.  I have 2 -1098's.  When I enter the 1st form, my taxes owed DECREASE.  When I enter the 2nd form my taxes owed INCREASE.  Any idea why that is?  I assumed that the Interest paid for the original and refi'd loan should add together and it should reduce the taxes I owe.  What am I missing?  

[ErnieS0]

Some TurboTax customers are experiencing an issue with their Home Mortgage Average Balance.

This can cause in the the Home Mortgage Interest to be incorrectly limited.

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

[dweisman0513]

I received the following message from turbotax:

TurboTax update has been released resolving this issue. If you are using TurboTax Online, updates are applied automatically. If you are using TurboTax Desktop, make sure you download and install the latest update. If you need assistance with updating, please refer to the following support article.

BUT, it still doesn't work correctly.  FYI, I am using the online version.

[ReneeM7122]

Please take the following steps to resolve the 1098 issue in TurboTax Online if it still has not resolved itself for you.

Multiple 1098 mortgage forms

If you have multiple 1098 mortgage forms, you’ll enter them one at a time. After going through the steps with the first one, you can add a lender when you get to the Mortgage deduction summary screen. (In the case of a refinance, it's best to enter the 1098 from your original loan before the 1098 from your refinance.)

But, if they're both from the same lender, and one of them has the “Corrected” checkbox marked at the top, enter the corrected 1098 and discard or shred the other one.

What do I do if I have multiple 1098s from refinancing my home debt?

If your total home debt is under $375,000 ($250,000 for married filing separate) there is nothing new for you to do in 2020. Enter each 1098 as you normally would.

Home Debt Over $375,000

Under tax law, you are limited on the amount of home interest you can deduct. The limit is based on the loan amount and date of the origination of debt. We want to make sure we calculate this correctly for you. 

If you refinanced last year, you’ll have a Form 1098 from your previous lender and one from the lender you refinanced with. You’ll need both forms. 

Follow these steps to enter your mortgage information:

1. Gather all of your 1098 forms related to your refinance (the form from your original lender and the form from your new lender)
2. Grab a calculator and add together the box 1 amount from each form. Enter the total in TurboTax as Box 1 Mortgage interest.
3. Add the Box 5 amount from each form and enter the total as Box 5 Mortgage insurance premiums. (If you weren’t required to pay mortgage interest, these boxes will be blank on your forms and you won’t enter anything.)
4. Add the property tax paid from each form and enter it in the Property (real estate) taxes box.

Next, finish adding info for boxes 2, 3, 7, and 11 using Form 1098 for the original loan.

What if I have more than two 1098s?

You should combine all of the 1098s directly related to the refinance and enter it as one 1098.  An example of this is if you refinanced two loans into one loan. Any 1098s not directly related to the refinance should get entered separately.

What if I paid points?

Points on Loans Paid Off in 2020: Enter the points on your 1098 you have started and mark you paid off the loan when promoted.

Points on Loans on New Loans: You will want to enter a separate 1098 to cover these points paid. When prompted, enter 0.00 for Boxes 1, 2, 5, and the Property (real estate) taxes box, and checkbox 7, as you’ve already entered the details on your first 1098. For Box 3, add the date in 2020 when the loan originated.

[dweisman0513]

Thank you but these are just instructions from Turbotax online.  

[JoannaB2]

Some Turbo Tax 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 return.  See  this link  for what to do if you have multiple 1098s.  See also this Turbo Tax Help.

[crazeeeyez]

We bought a new home in 2020 and when I enter the new mortgage (not refi) my taxes owed goes waaaaay up, and it says to use the standard deduction.  If I say it's not a secured loan, my tax liability drops way down.   I can't imagine this is right.

BTW using TurboTax Mac (not Online).

[ReneeM7122]

Congratulations on the purchase of your new home!  While buying a home can lower your tax bill or help you get a bigger refund, it isn't always a guarantee.   Your deductions for homeownership combined with your other deductions (if any) must exceed your standard deduction to change your tax due or refund. If you purchased your home late in the year, you won't be eligible for a full year of home ownership deductions.

Things that cost a lot but don't play into your deductions are your down payment, homeowners insurance, your inspection, appraisal, settlement fees, and so on. If you did any repairs or improvements to your new home, it gets added to the basis.

Closing costs on your new home are not deductible except for prepaid interest, prepaid property tax or loan origination fees.  

You should have received a Form 1098.  If you entered the information and you still see an unacceptable amount of tax due, you may want to ask for an offline review.  We can examine your return to see what's happening.  The things mentioned above are just a few reasons why you may not get the benefit expected.  

If you've prepared your tax return and want to submit a written question to a tax expert you can receive a written response. You pick the part you'd like reviewed and add any questions you have for them. You'll get a response with their advice for you about a day later.

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@crazeeeyez