Mortgage interest calculation refi problems; TT crashes or disallows interest and points

[JKL219]

I refied 2008 loan in 2022 so I have 2 1098's. Both have loan balances over $1M since it was a refi and so we have a $ 1M loan interest limit. Total interest on both  > $25k  + $5035 on the points on the refied loan. TT tells us "we're better off using standard deduction"  and also disallows the interest and points!!!  I got a system error and TT crashed 2x's. I have tried to input this data this 6 times over 3 days  There obviously is a bug somewhere and TT can't calculate the mortgage interest deduction and points correctly.  I AM VERY UPSET 

[maglib]

@JKL219  did you go through the whole interview for mortgage interest?  Did you fill out the balance of the 1st mortgage became 0?  Mortgage interest is not fully deductible for mortgages over 1mm. 

Is your software fully updated?

If that doesn't work, make sure you go through the full home mortgage interview and enter the 1098 exactly how it was received for the first 1098.  Then enter the 2nd one.  

Home acquisition debt limit.

 

The total amount you (or your spouse if married filing a joint return) can treat as home acquisition debt on your main home and second home is limited based on when the debt is secured.

• For debt secured after October 13, 1987, and prior to December 16, 2017, the limit is $1 million ($500,000 if married filing separately).

• For debt secured after December 15, 2017, the limit is $750,000 ($375,000 if married filing separately). However, a taxpayer who enters into a written binding contract before December 15, 2017, to close on the purchase of a principal residence before January 1, 2018, and who purchases such residence before April 1, 2018, is considered to have incurred the home acquisition debt prior to December 16, 2017.

The limits above are reduced (but not below zero) by the amount of your grandfathered debt (discussed later).

Refinanced home acquisition debt.

 

Any secured debt you use to refinance home acquisition debt is treated as home acquisition debt. However, the new debt will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing. Any additional debt not used to buy, build, or substantially improve a qualified home isn't home acquisition debt.

If you want to see all the further limits and calculations:

https://www.irs.gov/publications/p936

[DMarkM1]

As Maglib states make sure all updates are in and delete all the 1098s you have entered and start from scratch entering the oldest loan first.  Answer the question asking if this is the most recent 1098 on this loan as "No."  Then enter the 2nd (current) 1098 and answer "Yes" to the "Most recent" question.  Answer the refi and points questions as needed on the most recent 1098 entries.  

Once both are entered select "Done" on the bottom of the page and you will be asked additional questions on the loans concerning payoff amounts and dates. Be sure to leave the date blank for the most recent loan.

Your interest will be limited since the loan(s) are over $1M so you will be notified and have the opportunity to put in an interest amount based on your own calculations.  

Those calculations should be.  Box 2 of loan 1 plus the end of year balance on loan 2 (January 2023 statement)/2.  That will give you the average loan balance since there was no overlap on the loans and you had a mortgage all year.  Divide your loan limit (1M) by your calculated loan balance average to get a ratio.  Multiply that ratio by the total interest you paid on the two loans (boxes 1) to arrive at your deductible home interest.  

Use the same ratio to multiply by the deductible portion of points paid in 2022 to get that allowable deductible amount.  Generally you can't deduct all the points paid for a refi in the year paid but must deduct them ratably over the life of the loan.    

Be sure to keep a copy of your calculations with your tax records should it ever come up.

[JKL219]

Thanks I will try again using the ave loan balance method. FYI-The points are from the first 2008 loan that was paid in full in 2022. Different Refi lender so per the IRS, the remaining point balance can be all deducted in 2022. 

[JKL219]

Thank you. I manually computed the correct ave balance numbers and calculated  the allowable deduction amounts for both interest and points. At the end I manually imputed the correct numbers, and verified those numbers appear on my Schedule A form. Just concerned because the TT mortgage interest worksheets have the wrong calculations that TT derived.  I 'm worried that the IRS computers will flag that if the IRS  computers compares the two.  I can justify that I calculated it consistent with the IRS 1040 mortgage interest Instructions. My interest+ points deduction calculations are lower than TT's incorrect numbers. And yes I will save my supporting paperwork. Art least I can finish my taxes now.

[PatriciaV]

The TurboTax worksheets are not submitted with your tax return to the IRS. As long as you can support the calculation of the interest you claimed on Schedule A, you should be fine.