Mortgage points are not transferring to Schedule A when loan sold from one lender to another in the same tax year

[RM472]

Hi!

Issue:  I bought my first house and received two 1098 forms due to sell/transfer (not a refinance) of my loan from first mortgage lender bank to another within the same tax year 2022. Turbo Tax calculates the total mortgage interest as reported on 1098 forms and limits it to a value based on $750K cap. However, I doesn't transfer points I paid and reported on my first 1098 form to Schedule A. 

Details: 

I purchased a new home in Aug 2022 with a mortgage of about $1M with points.  I received a 1098 form for the same. This home was sold (not refinanced) by the Lender A to Lender B within two months. Received 2nd 1098 for that from the Lender B.

Lender A 1098 shows correct points $ I paid (Box 6)

Lender B 1098 has the same mortgage origination date (Box 3) as mentioned on Lender A 1098 form Box 3. 

Lender B 1098 has the Box 11 with the correct date of mortgage acquisition date when Lender B acquired the mortgage loan from Lender A

Lender B 1098 doesn't show any points (Box 6)

I have put in 1098s in Turbo Tax Desktop version (Home and Biz for Windows) in the same order of the loan. Older 1098 from Lender A first with all details with correct questions not marking it as the latest. Then newer 1098 from Lender B as latest. My tax status is single and itemizing my deductions. Turbo Tax correctly calculates the total Mortgage Interest and limits it down to a right number based on $750,000 loan cap limit for Single taxpayer. However, it doesn't transfer points to schedule A and thus doesn't allow me to take any deduction for the points.

If I show points paid on 2nd 1098 (although I didn't pay any pint to Lender B) and not reported, it reflects it on Schedule A. Similarly, if I changed the order of 1098s in TurboTax from latest (Lender B) as first and then older (Lender A), calculations are different with points transferred to Schedule A.  Can you please help resolve this? 

[DMarkM1]

Yes.  Since your loan was simply transferred/sold to another lender it is essentially the same loan just a new servicer.  Enter the oldest loan (1098) and indicate that it is not the latest 1098 on the loan.  Do not enter the points on that 1098.  Put the box 6 points on the current 1098 and indicate that this is the latest (most recent) 1098.  This will allow the correct interest and points to flow to schedule A. 

[RM472]

Thank you @DMarkM1. With the workaround suggested by you in your reply I can now see that mortgage points get transferred to Schedule A, However I noticed that my points deduction is also limited by the 750K cap (for tax filing status of single). Is that expected or I should be able to take the full deduction of points I paid irrespective of the loan amount.

[DMarkM1 · Accepted solution]

Yes, that is expected.  The points deduction is also limited by your qualifying loan limit.  

From Publication 936:  "Limits on deduction.  You can't fully deduct points paid on a mortgage that exceeds the limits discussed in Limits on Mortgage Interest Deduction."

[Todd64]

There was an error in TurboTax 2022. If you filed your return prior to March 9, 2022, itemized deductions, and had home mortgage points in 2022 then TurboTax failed to include those points on your Schedule A and you paid too much in taxes.  This issue was fixed in the March 9th update and it now calculates correctly.

Have just been through this with TurboTax and had to file an amended return myself

[RM472]

@Todd64Thank you for your reply. However, I don't see it fixed in Home and Business Windows Desktop version. My software is up-to-date. I just tried the it and still see the same issue. I deleted and re-entered my both 1098 forms. Unless, I use the workaround suggested by @DMarkM1 , I still don't see points transferring to Schedule A. Which version of Turbo Tax are you using?

[PatriciaV]

If the points aren't appearing on Schedule A, enter the amount on Form 1098 that you marked as "most recent." This appears to be a limitation in some versions of TurboTax.