Mortgage Interest Deduction Limits

[Flysouth]

I have the same exact issue (4 1098s for the same mortgage for 2019) and TurboTax has calculated 3 different refund amounts when I used the workarounds here.  I'm VERY concerned that TurboTax is not calculating things correctly.

How is it possible that SAME input results in three DIFFERENT results?

TurboTax - time to actually provide a meaningful response to this.

[KrisD15]

I have included a link to IRS Pub 936 if you would like to read why the interest can be computed at different amounts because of the many different factors that go into calculating it. It is helpful to understand the requirements. The questions the program asks may make more sense to you after reading the publication. 

The interest may be limited by the amount of acquisition debt. The 1098 forms do not cover that in detail, therefore the answers to the interview questions are also needed. 

If you use the instructions I posted above (not a work-around) you are adjusting the interest yourself. This would be done in a situation where the 1098 and interview questions do not provide enough information for the program to make the final calculation. 

This is caused by the many stipulations the IRS has placed on the requirement to claim the home mortgage interest from 2018 going forward. 

IRS Pub 936

[NCperson]

do you have 4 1098's because the mortgage was sold multiple times.  In other words, you have the same mortgage on January 1 as you did on Dec 31 with no refinances.  If so, I'd just make believe it's one 1098 and input the data as such.  

what TT is testing for is whether you mortgage exceeds $750,00 and whether all the debt is considered 'acquisition' debt.  None of that matters if the reason for the multiple 1098's is that the servicing was sold over and over again. 

[dankey2003]

This work around works - thank you!!!

I sold a home and bought a new home - both mortgages qualify and are below the threshold.

My guess is that TT is adding the two mortgages for us which is more than the limit and defaulting to "YES" based on the added mortgages 

[JK20201]

For the second year in a row, turobtax incorrectly added an equity line to my mortgage interest deduction calculation and allowed for a full deduction of mortgage interest. The IRS flagged my 2018 return as a result, and it's now being audited. While preparing the 2019 return, I encountered the same issue. I had to manually adjust my entries in the mortgage interest worksheet. Turbotax added an equity line maximum balance of $100K and summed up the maximum for home mortgage and an equity line to $1,100,000, then fully deducted mortgage interest. I do not have an equity line and didn't enter one. Why does this keep happening?

[KrisD15]

That would be done possibly for the state return, since California does allow up to 100,000 home equity loan interest. 

Are you filing a California state return? 

[jeep2me]

Thank you, @jake93 your suggested workaround -- check "No," save, then back out without clicking "continue" -- worked for me.

And I agree it is very frustrating that, as of March 28, over a month after this was first reported, the bug still exists. This bug changes a $2,700 refund to a $1,400 tax bill for me. Huge difference.

Very disappointed in Intuit. The whole American tax system is a joke; don't even get me started on how companies like Intuit actively lobby to keep it needlessly difficult -- and then offer products that only create more difficulties.

[cht1951]

I'm having the same problem with TT this year.  I have multiple 1098s on a construction loan that was extended, then expanded again with a different loan number, then finally for about 30 days when building loan was converted to a mortgage before being sold off to a big bank.  So all three are 'original loans' on the same home (a vacation home).  TT appears to add up the value of my primary home and these 3 loans AND the value of the mortgage after it was sold to a larger bank.  I'll try the workarounds from last year's feedback.

[Cynthiad66]

If there is a refi and there was an outstanding mortgage principal listed in both of them on Line 2 on the 1098. When you do put an outstanding balance in both forms, then the program adds them together and if that number is greater than $750k, then it puts you in the category to "limit interest". To get that to go away, you need to go back to the deductions section and click on "edit" mortgage interest statement. Change the line 2 of the mortgage that you no longer owe on (like the one that you refinanced and paid off) to a 0 (zero) because you have refinanced out of that loan and no longer have an "outstanding mortgage principal". Once you change one of them to zero (the one that was paid off by the refinance) then it should no longer pop up with that error at the end when you go to file

[Bostondoc84]

@Cynthiad66 @cht1951 

FYI, while this move suppresses the error it creates other possible issues as it ignores the fact that the average (arithmetic mean) balance of the mortgages (which is what the IRS requires) is not being reported. Rather, you are just selecting one essentially arbitrarily. One one hand, this will probably not change the end result deductible mortgage interest (likely your goal), but TT should fix this so you don't have to fudge the data to work around the code error. More importantly, for a subset of users near the deductibility limits, this method can easily create inappropriately high or low deduction claims. Regardless, I certainly don’t think it is wise for TurboTax employees to be suggesting users intentionally feed the program erroneous data.

See several recent threads and posts I have posted in (you can click on my username I believe) - there is an entire community of people experiencing this issue and I would suggest waiting to file (if able) until a definitive resolution is offered. Just my $0.02 after having spent hours and hours digging much deeper into this than I ever wanted. 

[Cynthiad66]

We have received this information to pass along to customers receiving this error.  
This is a known error and we are working to correct it.  For now, please follow the instructions below.

Some TurboTax customers are experiencing the following error message when running the Federal Error Check

Check This Entry:

Tax and Interest Deduction Worksheet: Limited Interest and Points must be entered

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

[crazynavydavy5150]

Concur.

Having the same issue again in 2021 using TT Premier online with CA state return.  This seems to be a recurring bug.  I need to be able to access the worksheet to manually change the box from yes to no.  TT eliminated the ability to access the worksheets direct it seems.  I have deleted and reentered multiple times.  Looks like I may have to print and mail...so frustrating!!!

[JamesG1]

Some TurboTax 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 tax return.

Please sign up for email notifications when an update related to this issue is available here.

See also this TurboTax Help.

[jake93]

I have the desktop version and am having the same issue this year. I also am not allowed to change the “does this apply to you” question to no and the software won’t allow me to manually change any of the forms. The software is useless unless this bug is fixed. As an aside I tried out the HRB free version and was able to get the correct deduction for my refinanced mortgage. I already paid for TT and don’t want to pay for twice for software to complete my taxes. However, if this isn’t fixed in a timely fashion.......Goodbye TT and all of Intuit products.  It has already been over 1 year with no correction by TT. 

[DianeW777]

Thank you for providing this information. We are aware of this experience. Please sign up for email notification when an update related to this issue is available here.