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jorb
New Member

Mortgage Deduction for Two Homes

Turbo Tax Premier says I have to adjust my mortgage deductible:

 

House 1:

Bought house in 2000

Refinanced in March 2012

Lived here until July 2020

Jan 2020 Balance: 109,388.09

Dec 2020 Balance 104,949.29

 

House 2:

Bought in  March 2020

Moved in in July 2020

Have yet to sell house 1, it is vacant.

Beginning balance 540,000

Refinanced in October 2020

Beginning balance for new loan 404,000 I paid the mortgage down a bit during refinancing. 

Dec 2020 balance 403,269.14

 

So I only have two loans, one for each home. But I think Turbo Tax is adding them up as three loans. 

 

How do I enter this in Turbo Tax?

3 Replies
Mike9241
Level 15

Mortgage Deduction for Two Homes

House 1:

Bought house in 2000

Refinanced in March 2012

Lived here until July 2020

Jan 2020 Balance: 109,388.09

Dec 2020 Balance 104,949.29

 

on house 1 the allowable interest is based on the original loan balance on the date of refinancing. so if original loan balance was $50,000 when you refied. only interest on $50,000 of the rfi is allowable mortgage interest,  

so if it you took cash out on the refi. that part may be nondeductible 

 

House 2:

Bought in  March 2020

Moved in in July 2020

Have yet to sell house 1, it is vacant.

Beginning balance 540,000

Refinanced in October 2020

Beginning balance for new loan 404,000 I paid the mortgage down a bit during refinancing. 

Dec 2020 balance 403,269.14

 

there should be no issues with the mortgage on the new home.  your  total mortgages  at any one time in 2020 were less than $750,000

 

and yes you had 3 mortgages.

the refi on the first.

the original mortgage on the second

and the refi on the second. 

 

under current law, if you refi a mortgage for more than the remaining balance on it, that portion of interest may be non-deductible. it is ok to refi for more to pay for improvements.   there's even the possibility if you cash out, the interest on the cash out portion could be deductible if used to buy investment property but not for a 3rd house or if used to pay down credit card debt or other personal purposes. 

 

jorb
New Member

Mortgage Deduction for Two Homes

The problem I am having is Turbo Tax will not let me proceed without making a change. It says that based on what I have entered the "Average loan balance exceeds...."  I think Turbo tax is adding the values of the original purchase on the 2nd home with the refi of the 2nd home, since I have 3x 1098s.  

AlanT222
Expert Alumni

Mortgage Deduction for Two Homes

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

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