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My Federal return includes a 1098 for my primary mortgage and another 1098 for my HELOC. During final checks, why does software ask for principal outstanding again?

 
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Vanessa A
Employee Tax Expert

My Federal return includes a 1098 for my primary mortgage and another 1098 for my HELOC. During final checks, why does software ask for principal outstanding again?

This should have been entered when you entered your 1098's.  If it was not, you will find these numbers on your 1098 for both your HELOC and your Primary Mortgage.

 

The reason this needs to be entered is because depending on when you bought the house, the interest is capped on the first $750,000 of the combined mortgages. ($1,000,000 for mortgages taken out before December 16, 2017).  The mortgage interest deduction is also limited to the portion of the mortgage that was used to buy, build or substantially improve the home that it secures.  This means, if you used the HELOC to pay off credit card debt or to buy a boat, the interest on the HELOC is not deductible.  

 

So, you will need to enter the mortgage principal balance to complete the return if you are itemizing to be sure that your mortgage interest deduction is not capped or otherwise  limited. 

 

Deducting Mortgage Interest

 

 

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