My mortgage was transferred and I received 2 1098. and Turbotax is asking me about final principal balance which is I don't know for the first 1098. How to enter?

[JotikaT2]

If your first mortgage was transferred to a new lender, then your balance at the end of the year on the first mortgage would be zero. 

This is because the entire amount was transferred to the new lender and as such, no longer exists at the end of the year.

[Oscarjeon]

The exact question from Turbotax is "Enter your loan balance as of January 1, 2021, or the final principal balance if you paid off this loan in 2020." 

is the answer still "ZERO" for the first 1098?

[Cynthiad66]

Yes.  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. 

[Oscarjeon]

To be clear, I have received 3 1098 form as below. this is the situation. hot to enter them in Turbotax

	1st 1098	2nd 1098	3rd 1098
Lendor	A	B	C
Explain	This was transferred to B	This was paid off after refi	Current mortgage
Box 1	1,433.75	12,323.45	2,579.26
Box 2	654.10	443,345.00	443,500.00
Box 3	11/25/2019	11/25/2019	9/16/2020

[JohnB5677]

Unfortunately, the formatting makes it difficult to follow the flow of the mortgages, but the solution is:

• The mortgage that you had at the end of 2019, (1st mortgage) will have a principle balance of zero, because it was paid of to secure the 2nd.
• The second mortgage will also have a principal balance of zero.  Because it was paid off to secure the 3rd mortgage.
• Finally, the mortgage you currently have (3rd mortgage) will reflect the principal as of 01/01/2021.

The IRS instructions for completing Form 1098 state that box 2 should be the amount of principal outstanding on the mortgage as of January 1, 2021.  If the loan was no longer being serviced by that company, there would be no outstanding principal on that mortgage and the amount should be "0".  

Entering '0' into box 2 in your tax return is the correct way to handle a loan that has been closed out.

[PrestoAJ]

Thank you for asking this question! I am in the same situation, I refinanced my home two times in 2020 and received three 1098s. Each loan balanced was moved from two mortgage companies and onto my current mortgage company, taking out no cash in the process.

Turbo tax says: "Enter your loan balance as of January 1, 2021, or the final principal balance if you paid off this loan in 2020". That would leave me to believe that even if you refinanced it, it is asking for the final amount before you moved it between lenders.

However, if the expert above is correct, then that sentence is only applying if you actually paid off that loan and have no new debt. So if you refinanced the mortgage, enter $0 as there is no longer a balance and ignroe the second part of that sentence.

TURBOTAX please rephrase that sentence, super confusing.

[Anonymous]

YES to $0.  The wording is confusing and can make a significant difference as I also thought to put the final principal amount prior to payoff, but this forum/expert led me to put $0 for the first 1098.

Luckily TT asks you again during the review process but still confusing.

[Critter-3]

If you read the screen instructions carefully and you click on the learning links in the program it will tell you exactly what to do especially in this confusing section ...