On the 1098 for the home I sold, should the outstanding mortgage principle in Box 2 be zero?

[stagay9929]

I received two 1098's, and entered them separately (one for the home I sold, and one for the home I purchased). I elected to allow TurboTax to import the 1098 directly from the lender for the home I sold and paid off, however Box 2 of the 1098 shows an outstanding mortgage principle in the amount of the pay off.  Is that correct, or should I delete the amount in Box 2 and put zero?

[HelenC12]

Yes, it's correct. No, don't delete it. Per IRS instructions, Box 2 shows the outstanding principal on the mortgage as of January 1 of the calendar year.

[Al2222]

Hi HelenC12, What is combined both mortgages exceed the $750,000.  By filling in both boxes its doubling counting the mortgages and might prevent you from taking the full interest deduction.  If you had a mortgage for $500k and then sold the house secured by the mortgage and bought another house with another $500k mortgage you just essentially transferred the mortgage from one property to another. But by filling out Box 2 twice the software thinks you had $1M in mortgages which is overstating what happens. 

[Vanessa A]

You would use the Outstanding Mortgage Balance method to solve this.  Basically, if you owed $500,000 and sold your house in March, then bought a new house in April for $500,000 you would average the balance out over the year. 

So you would use $500k for Jan, Feb and Mar then $0 for the rest of the year for an monthly average balance of $125,000.  

Then for the new house you would enter $375,000. ($500k for 9 months, $0 for 3 months)/12

So you would enter $125k for the balance for the first house and $375k for the balance for the second house. 

[FredJH]

And how does one do this in TT?

[AliciaP1]

When you enter your 1098 you will see the box 2 Outstanding Balance where you can enter the amount.

Here's how to enter your mortgage interest statement in TurboTax:

1. Open or continue your return, if you haven’t already
2. Locate the search bar in the upper right of your screen, and search for 1098. Select the Jump to link at the top of the search results
3. Answer Yes on the screen Did you pay any home loans in 2022?
4. On the following screens, you can choose how to enter your 1098:
   • If your lender is a TurboTax partner, you can import your Form 1098. Search for your bank or financial institution and enter your login credentials to begin the import process
   • If you prefer to upload a copy of your form from your device, or type in the info yourself, select Change how I enter my form and follow the instructions on the next screens
5. As you continue through the screens, answer the questions about your mortgage according to your situation and enter or confirm the info from your 1098

@FredJH