Question says: Enter your loan balance as of 1/1/2021, or the final principal balance if you paid off this loan in 2020. If paid off through refinance, how do fill this?

[adam803]

if I didn't pay it off but it was paid off through a new bank in refinance, do you fill in what the bank paid off?

[JohnB5677]

Yes,  If your mortgage was transferred, or refinanced, the original loan will have been paid off and the principal associated with it will be zero. 

Under normal circumstances the only mortgage on a specific property that will have a principle due is the one that is in effect at the start of the new year.  all others will be zero.

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.

[dslatcher]

when I input $0 in box 2 (my mortgage was paid off in 2020), I get an error message that "outstanding mortgage principal must have a value).  Thank you.

[JamesG1]

The instructions for IRS form 1098 state:

Box 2.

Shows the outstanding principal on the mortgage as of January 1, 2020. If the mortgage originated in 2020, shows the mortgage principal as of the date of origination. If the recipient/lender acquired the loan in 2020, shows the mortgage principal as of the date of acquisition.

Box 3.

Shows the date of the mortgage origination.

Have you seen this TurboTax Help?

Some TurboTax customers are experiencing an issue with their home mortgage average balance. This can cause the home mortgage interest to be incorrectly limited.  This may be affecting your tax return.

Please sign up for email notifications when an update related to this issue is available.

[yzhong]

So for example when I got $10000 refinance from a new lender in April 2020, the answer I should fill in $10000 or zero for the old lender? 

[JamesG1]

In TurboTax Online Deluxe, I was able to enter a home loan on an IRS form 1098 and the second IRS form 1098 for the refinanced loan.  For the refinanced loan, I used the balance of the loan at the time of loan pay-off. 

To refer to your example, I would have used the $100,000, not the $0.

I was given the full mortgage interest deduction and the Home Mortgage Interest Limitation Worksheet did not add the two mortgage balances together.

The entries were made at Federal / Deductions & Credits / Mortgage Interest (Form 1098).

Entries for the original loan

Do any of these uncommon situations, I entered None of these apply.

Did you pay points, I entered I’ve already deducted.

Was this loan paid off or refinanced, I entered Yes.

Is this loan a home equity, I entered No, this is the original loan.

Entries for the second loan

Do any of these uncommon situations, I entered None of these apply.

Did you pay points, I entered I didn’t pay points.

Was this loan paid off or refinanced, I entered No.

Is this loan a home equity, I entered Yes, this is a loan I’ve refinanced.

So what type of loan is it? I entered A mortgage loan that I’ve refinanced.

Have you ever pulled cash? I entered No.

[Ecloc]

I refinanced as well in 2020.  I put "0" for the first mortgage, then I had to retype the date it was paid off in the box to the right.  Then I put the refinanced amount and left the box to the right blank. 

When I did this the "0" value didn't give me an error to continue.  I've tested it multiple times and each time I enter "0", I had to re-enter the date it was paid off.

[AmyC]

You might try $1 for the balance.

[mpeper2511]

On the refinanced loan screen, if I enter $0 as the loan balance on January 1, 2021 it automatically puts $0 as the loan final balance BEFORE paid off.  Whatever I put in one box is automatically filled in the other box.  It forces these two numbers to be the same, which doesn't make sense.  The accurate answer would be $0 on Jan 1st because it was paid off earlier in the year and the actual amount that is paid off in the other box, but the screen is not allowing this.  Is this a bug?

[AmyC]

You want the total of your mortgage interest that is allowable. See Sched A line 8 instructions here. The balance of the loan can limit the allowed amount.  You can make one entry. Add the allowable interest together and use your current mortgage balance and original loan date.

Publication 936 (2020), Home Mortgage Interest Deduction | IRS

[mpeper2511]

On Mon, May 17, 2021, at 10:31 PM, Monica wrote:

If I enter $0 as the loan balance on January 1, 2021 it automatically puts $0 as the loan final balance BEFORE paid off, which doesn't make sense.  The two numbers are forced to be the same.

Attachments:

• image.png

[MJJVH]

2/13/22: TurboTax Home and Business has no entry box in the Step-by-Step mode for:

What was the original balance of your loan?

And when you run Error Check that box "Borrowed In 2021"  shows up in the color "blue" but you cannot enter a number in the blue box!

[RaifH]

Can you clarify why you are trying to enter the original balance of the loan? The amount borrowed in 2021 should automatically populate if you received Form 1098 for a new loan in 2021.

@MJJVH

[MJJVH]

There is no box on the 1098 form that asks for the original amount of the loan.

[RaifH]

Yes, that is correct. The original loan amount is not listed on Form 1098 and should not need to be entered into TurboTax. Box 2 is the Outstanding Mortgage Principal which is the balance of the loan on January 1, 2021. That is the amount that TurboTax uses to calculate the deduction for mortgage interest. 

@MJJVH