1098 has points pro-rated for $750,000 but turbotax is pro-rating them again in Schedule A Deductible Home Mortgage Interest Worksheet. How to avoid double reduction?

[hitesh-k]

In my 1098 row 1 has total interest on principal of more than $1M. The row 6 has the points, but they are already pro-rated for $750,000 limit by IRS.

Now on Schedule A Deductible Home Mortgage Interest Worksheet in Turbotax., the interest and points are summed up and again pro-rated for $750,000 limit.

This means my points are pro-rated and reduced two times. Is there a way to avoid this in turbotax? I asked my mortgage lender and they said it is standard practice to pro-rate points but not total interest. Moreover I don't see an option to add "Points paid in 2020 not on 1098" in the software?

[KrisD15]

If the points reported in box 6 are already prorated for the life of the loan, add the amount of the points to the interest on the 1098 entry screen in TurboTax. 

Add Box 6 to Box 1 and leave Box 6 blank.

[hitesh-k]

Is there a way to rather fill the "Points paid in 2020 not on 1098" section of the generated worksheet?

[Cynthiad66]

I have two options for you:

Follow these steps to add points paid:

1. Under the Federal menu, choose Deductions & Credits
2. Click Edit/Add next to Mortgage Interest and Refinancing (Form 1098)
3. Click Review next to the correct lender
4. Verify the lender, click Continue
5. Answer the question Do any of these uncommon situations apply, click Continue
6. Verify the entries on the 1098 (this does not include the points) and click Continue
7. Now you are at the points screen, answer the question appropriately. You will likely choose the first option, We paid points... The mortgage origination date is know based on the information entered on the previous screen for the 1098. Click Continue
8. On this screen, provide the information about the points you paid. Click Continue.

The tax treatment of these points will depend on the loan. If such points paid on a mortgage were for the purchase or improvement of a personal residence, they may be deducted in the year they are paid. Points paid to refinance a home mortgage are not deductible when paid, but must be capitalized and the deduction spread over the life of the loan (amortized). Points charged for specific loan services, such as the lender's appraisal fee and other settlement fees, are not deductible.  Per @VictoriaD75

TWO

 If that did not work.  Inflate the already reduced points to the 100% amount which will be computed to the correct amount.

Hope one of these solutions works.

Home Mortgage Points

[hitesh-k]

Yeah I went with the option 2 and inflated the points to match with what I paid in closing disclosures. After that the calculation turned out right. Thanks for the suggestions

[jordyun]

I have the same issue. I think turbotax needs to fix this. Initially I thought it's my lender's problem but it turns out that they did the right thing per IRS:
https://www.irs.gov/instructions/i1098
It should not be prorated twice in Turbotax.