Multiple 1098s Question, refi then loan transfer

[JJ_DMB]

Hi,

Apologies in advance for the long details scenario.  I am hoping someone can review and confirm I have done everything accurately as I am concerned I am not getting the proper deduction for mortgage interest and property taxes.

I have three (3) 1098s for 2021

1st   1098  Original Lender

2nd 1098  Lender A  Refinanced, took zero out only reduced interest rate and term

3rd  1098  Lender A transferred the loan to Lender B

I am confused how to answer the questions.  I think I have the original lender correct but it goes down hill from there.

Original Lender A

1. Primary Home?  Yes
2. Any situations apply, names not on 1098 etc..? No
3. Box 1 & 2 copied over and Box 3 origination date 4/20/2017
   • No mortgage insurance
   • No property taxes paid yet from escrow as they disbursed after the Refi
4. Mortgage acquisition date and check box 7 are blank.
5. Is the loan secured by a property of yours?  I put YES as it is the original loan for the house.
6. No points
7. Is this the most recent 1098 of the loan?  ??? I put No, please confirm.
8. Is this the original loan you used to buy property?  I put YES as it is the original loan for the house.

After the first 1098 it said the standard deduction saves me the most.

Lender B - The Refinance

1. Primary Home?  Yes
2. Any situations apply, names not on 1098 etc..? No
3. Box 1 & 2 copied over and Box 3 origination date 1/25/2021
   • No mortgage insurance
   • 1st Property Tax installment was disbursed by Lender A and answered in this question. 
4. Mortgage acquisition date is blank.
   • Box 7 is Checked
5. Is the loan secured by a property of yours?  I put YES as it is the original loan for the house.
6. No points
7. Is this the most recent 1098 of the loan?  ??? I put No, please confirm as Lender B "Refi" sold my loan to Lender B
8. Is this the original loan you used to buy property?  This is where I am really confused this is still the loan for my original property, no money was taken out, it is not a HELOC.  Should the answer here be Yes or No?  As an example I said No since this is a refinance and it generated the following questions.
   • Original Loan? No
   • HELOC or Refinance? Yes
   • Cash Out? No

After the 2nd 1098 it said the standard deduction saves me the most still, a little surprising on a jumbo loan.

Lender C - The selling/transfer of the loan

1. Primary Home?  Yes
2. Any situations apply, names not on 1098 etc..? No
3. Box 1 & 2 copied over and Box 3 origination date 1/25/2021 Same as Lender B "Refi"
   • (Makes sense if selling a loan between lenders doesn't change anything and this date only refers to refinancing.)
   • No mortgage insurance
   • 1st Property Tax installment was disbursed by Lender A and answered in this question. 
4. Mortgage acquisition date is 08/01/2021.
   • Box 7 is Blank
5. Is the loan secured by a property of yours?  I put YES as it is the original loan for the house.
6. No points
7. Is this the most recent 1098 of the loan?  Finally I put YES here as it is the final lender on the home.
8. Is this the original loan you used to buy property?  This is where I am really confused this is still the loan for my original property, no money was taken out, it is not a HELOC.  Should the answer here be Yes or No?  As an example I said No since this is Lender C that bought the loan from Lender B "Refi" and it generated the following questions.
   • Original Loan? No
   • HELOC or Refinance? No, since this was Lender B "Refi" selling the loan to Lender C
9. Have you used this loan only on the home I took it out on? Yes But this is confusing as I have not pulled any money out for improvements.  Is this the correct answer?

After the 3rd 1098 it no longer said the standard deduction was better but only dropped my taxed due down by $400, this doesn't seem right on a jumbo loan.

Thank you everyone for your help and validation of this!

[RaifH · Accepted solution]

Yes, all your responses look correct. Your mortgage interest deduction is based on the interest paid on your loans, which is the sum of Box 1. 

Since you acquired your home before December 15, 2017 and have not taken any cash out with the refinances, your deductible interest is limited if your outstanding mortgage principal in Box 3 exceeds $1 million. Without knowing specifics about your interest paid, other itemized deductions, or how much your standard deduction is, I can't specifically state whether TurboTax is calculating everything correctly. However, if you answered the questions as you said, that should correctly apply the limit.

Please note that once you make all three entries and it returns you to the Home loan deduction summary screen, click Done. If your average balance exceeds $750,000 TurboTax will ask you a few follow-up questions. Answer Yes to Do either of these apply to this loan? TurboTax will correctly apply the proper mortgage limit on your home acquisition debt. If you did not answer this, TurboTax will be applying the $750,000 limit that applies to homes purchased after 2017. 

You will then enter the balances for all your loans. TurboTax determines the average balance using the balance of the first month (the amount reported in Box 3) and the last month which is the amount reported as of January 1, 2022. This might also shave a few dollars off your taxes since your average balance will be lower than the box 3 amount.