Mortgage Interest Limitation not correctly calculating

[DaveF1006]

No, leave it blank.

[Bestvalue888]

Cool I will leave box 11 blank. What about the  box2 amount? Do I enter $860K (after refinancing)  or do I enter the $890K (pre-refinancing)? Thanks!

[DaveF1006]

I would use the latest loan amount after refinancing but it really doesn't matter as long as it is is under the $1M threshold.

[Bestvalue888]

Oh I see. Thanks so much for your assistance. Greatly appreciated!

[Bestvalue888]

Sorry one more follow-up question: next year when I do the tax, I will have only one 1098 from this new loan company ( the one that has $860K). So should I just enter this new one and delete the record of the old but leave the Origination date as 2/2017, the original loan date? So that way I can be within the $1 million threshold, correct? 

[Bestvalue888]

Sorry one more follow-up question: next year when I do the tax, I will have only one 1098 from this new loan company ( the one that has $860K). So should I just enter this new one and delete the record of the old but leave the Origination date as 2/2017, the original loan date? So that way I can be within the $1 million threshold, correct? 

[MaryM428]

Your mortgage origination date is the date you took out your loan or, if it’s a refinanced loan, the date you refinanced it.

When you refinance a mortgage (in this case a new lender), the old mortgage ceases to exist - it becomes a new mortgage. 

@Bestvalue888

[Ritesh Panchal]

Hello,

I had originally purchased my home in Feb 2017. I had re-financed my loan last year. While entering the 1098's in TT I am not getting the entire deduction. It is only giving me a "portion" of the interest paid towards my deduction. As a result of this my taxes are increasing by approx. 4K.

My outstanding loan balance is $765,000.00.

Any idea on how to get resolve this?

I am kind of glad that tax filing deadline has been pushed to May 17th. Maybe TT will FIX this issue by then.

Thanks for your help and guidance.

[NCperson]

if you refinanced your loan and it is now $765,000, the portion that is tax deductible is limited to $750,000.  

without more information, it's hard to tell whether a $4k reduction is correct or not.

1) how much interest was on the older mortgage reported on the 1098 and what was the interest rate?

2) same questions for the newer mortgage. 

[Ritesh Panchal]

I had originally purchased this property in Feb 2017 and have re-financed it couple of times already. Last year I was able to get the entire deduction even when the amount was higher than $750,000.

I don't think the rules have changed either in this scenario. I believe the rule of $750,000 does not apply to properties purchased before Dec 2017. (No?)

Details of both of my mortgages are below -

Mortgage 1 -- Loan Origination Date 06/28/2017. Interest paid on it for TY2020 - $16,820.77. Interest rate -- 3.875%. Pay off amount $763,101.00.

Mortgage 2 -- Loan Origination Date 06/15/2020. Interest paid on it for TY2020 - $10,013.34. Interest rate -- 2.93%. (This is re-financed new loan). This re-finance is a simple rate/term re-finance. I did not take any cash/equity out during the re-finance. Loan amount $765,000.00

@NCperson-- Is this what you were looking for?

[NCperson]

@Ritesh Panchal -i have just tested this in TT and I do see a potential problem

you have two 1098's. enter each one separately,.

the mortgage acquisition date should be the same for both 1098's.  In essence it's the date you purchased the home and borrowed the money the 1st time.  TT uses this date to keep track of 'acquisition debt' 

the mortgage origination date is the date you closed on THAT mortgage.  

I tested two 1098's with a $735,000 loan balance using the same acquisition date in 2017; I then  entered the older mortgage having an origination date that is the same as that 2017 acquisition date and the newer mortgage having a 2020 origination date  

everything worked correctly and all the interest was posted as deductible. 

However, when I changed the origination date of the older mortgage to a date after Dec 15, 2017,  TT began to limit the interest!  I do not think that is correct This could be a situation where the older mortgage is a refinance of the original mortgage and the new mortgage is a second refinance!  The balance I used to test is under $750,000 in any event and TT is seeing them as two mortgages on the same home.   

Let's see if anyone else posts; what happens if you change the origination date of the paid off mortgage to be the same as the acquisition date?

[Ritesh Panchal]

This is what I tried just a few minutes ago..

Mortgage 1 -

Box 1 - Mortgage interest - $16,820.77

Box 2 - Outstanding principal - $786,202.33

Box 3 - Mortgage origination date - 06/28/2017

Box 11 - Mortgage acquisition date - Blank (1098 does not have any value in it)

TT Additional questions - Is this the original loan you took out to purchase this property -

Selected -- No, this is a home equity line of credit or a loan that's been refinanced.

Selected -- A mortgage loan that I've refinanced.

Selected -- No (Not pulled any cash).

Mortgage 2 -

Box 1 - Mortgage interest - $10,013.34

Box 2 - Outstanding principal - $765,000.00

Box 3 - Mortgage origination date - 06/15/2020

Box 11 - Mortgage acquisition date - 06/23/2020

TT Additional questions - Is this the original loan you took out to purchase this property -

Selected -- No, this is a home equity line of credit or a loan that's been refinanced.

Selected -- A mortgage loan that I've refinanced.

Selected -- No (Not pulled any cash).

TT additional questions -- We need a bit more information to wrap up this deduction....This is where I am being asked to enter information on outstanding balance as of Jan 1st 2021 or the balance before the load is paid off.

Mortgage 1 -- $763,101.51 / 06/22/2020

Mortgage 2 -- $754,461.49 / Blank.

TT is now giving me "STANDARD DEDUCTION" and not itemizing it !!!!

But, if I remove the enter the Mortgage 2 outstanding balance as $0 it is then giving me itemized deductions.

*** UPDATE *** I checked the Home Mortgage Interest Worksheet -- For Mortgage 2 it is considering the mortgage as "Post-12/15/17".

@NCperson  -- What am I doing wrong now? Any ideas?

*** UPDATE 2 *** I checked the "help links" in TT that are displayed while entering the 1098. TT is actually asking to combine the 1098's and enter as a single 1098. See the image below. Is this correct? Can we do that?

PS: This is frustrating. I have been using TT for a long time now and never had this kind of experience.

[NCperson]

what was the original mortgage balance when you purchased the home? 

On what date did you purchase the home?

Did you pay off that original mortgage and replace it with the Home Equity loan?  was the balance of that original mortgage at least $786,000?

The Mortgage 'acquisition date' goes back to the original mortgage as that is how TT determines if you are covered by the pre Dec 2017 $1mm limit or the post Dec 2017 $750,000 limit.  That date should be consistent on each mortgage. 

The mortgage 'origination date' is the date you closed THAT mortgage.  

<< *** UPDATE *** I checked the Home Mortgage Interest Worksheet -- For Mortgage 2 it is considering the mortgage as "Post-12/15/17".>>

this is the bug I THINK I uncovered.....the problem is as soon as you tell TT that the mortgage origination closed after 12/15/17, it moves everything to the $750,000 rule.  Go ahead and test it by changing the date to 12/14/17 and then to 12/16/17 

My best bet is to use an origination date prior to 12/15/17 so that this works correctly

this is from IRS Publication 936, page 10 on the left side: 

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.

[NCperson]

never mind - - 

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/bug-in-software-full-mortgage-in...

as long as you know you did not cash out refinance, just combine the 1098's and use dates prior to 12/15/17

I think of you input the two 1098's separately and use acquisition and origination dates prior to 12/15/17 it will work as well 

[Ritesh Panchal]

@NCperson- It looks like I will have to follow the TT's help instructions to get around this problem. Thanks for sharing the link to the bug and for helping through this. I will use the TT's instructions for now.

To answer your questions, my original loan amount was $824,500. Home was purchased on 2/23/2017. The original loan was paid off via re-finance. I have never taken out home equity loan (HELOC) or never taken cash out of this property.