Adding more interest expense

[jyeh74]

I understand that interest (1098) is limited based on when you took out your loan as well as the amount of the loan.  If I enter more 1098 to my primary home, how can my total refund reduce?  It should at least stay the same and the system just not allow any more interest deductions.  But I noticed adding another interest deduction reduced the refund.  That does not make any sense.

[JulieS]

Yes, in general adding additional tax deductions usually increases a refund, or doesn't change it. 

First of all, please doublecheck to make sure that is a refund and not a balance due showing. 

If your additional deductions are tax preference items, they may increase your tax if they are triggering Alternative Minimum Tax (AMT). 

For AMT, only home acquisition debt is deductible. Unlike the general rules, you can't deduct older home equity debt from before 2018. Follow this link for more about AMT. 

[jyeh74]

@JulieS I only had 1098 for primary.  It showed a refund.  Then I added 1098 for HELOC on primary.  

This is a weird phenomenon.  I have two 1098. 

Primary = $10k interest,  Heloc = $2k interest

I get a refund.

If I delete both out, and first add the Heloc = $2k interest, then add the primary = $10k interest, it will give me a lesser refund.

If I delete both out, and first add the primary = $10k interest, then add the Heloc = $2k interest, it will give me a higher refund.

I am not changing the information.  Just the order in which it is entered under Deductions and Credits under Your Home.  Why is this happening?

[MarilynG1]

It shouldn't make a difference in what order you enter your 1098's for Mortgage Interest.  However, make sure for the HELOC, that you indicate it is a HELOC, and what amount of the proceeds was used on the home. 

Sometimes the Refund Meter is strange, so if you are seeing these results immediately after your entries, keep going through your return items, the number may change again, possibly when you finish the Deductions & Credits section, and move to the next section.

Here's more info on Deducting Mortgage Interest.

@jyeh74 

[jyeh74]

@MarilynG1 Yes, Heloc was entered as Heloc.  Although nothing changes even if you select another answer like "none of these".  The sequence on how it is entered makes a difference for me.  Not sure why.  I went through the end.

[MarilynG1]

Since we can't see your return in this forum, you may want to Contact TurboTax Support for more help.

In cases where you have two 1098's and one is for a Refinance, or one is for a second home, should issues with loan balances changing refund amounts arise.

This should not apply in your case, though.

Just in general, if you're using TurboTax Online, close the program, and clear your Cache and Cookies.   

Make sure you don't have any other programs running in the background (like Email).  Try a different browser. 

@jyeh74 

[jyeh74]

@MarilynG1 ill call but this is installed version on computer not online version.

[MarilynG1]

Understand, but the installed version also goes Online for various reasons (updates, help, etc.) so it can also be affected by computer/internet issues.

If you can't get resolution (tech support is able to access your computer), let us know and we'll try to help further. 

@jyeh74 

[jyeh74]

@MarilynG1 
I just spent some time on the phone with TurboTax support and they were unable to resolve. They said the sequence should not matter on total refund. It should be the same

@JulieS when I add the Heloc 1098 in box 1, refund will increase.  However, when I go to smart check, it asks for outstanding mortgage principal.  The Heloc 1098 doesn't state the outstanding mortgage principal.  Weird, because my primary 1098 has it in box 2 but the Heloc 1098 does not.  The Heloc was taking out later in July, 2023.  So there was technically no principal balance in the beginning of 2023.  Is it asking for original Heloc amount taken later in July, or what the outstanding mortgage principal was as of Jan 1, 2023?  

If its asking for the later, the outstanding mortgage principal as of Jan 1, 2023 = 0, then refund will increase.  If enter the amount of the Heloc balance that was taken out, then the refund will decrease.

[PatriciaV]

Look closely at the Smart Check question to identify which 1098 it's asking about. If a sub-form appears, you may need to scroll to the top to identify the 1098 in question.

For the original mortgage, enter the outstanding principal as of January 1 of the current year (ie: 1/1/24 when preparing a tax year 2023 return).

Since the HELOC was taken out mid-year, enter the mortgage principal as of the date of origination.

Look closely at the Smart Check question to identify which 1098 it's asking about.

@jyeh74 

[jyeh74]

So if I am doing 2023 taxes, you look at the principal balance of 1/1/24 (this year) or 1/1/23 (current year)? 

[DawnC]

You should enter the balance of your HELOC principal balance as of 01/01/2023.   This amount will get added to the principal amount of your mortgage and is used to make sure you are within the $750K limit.   See Deducting HELOC Interest   

In most cases, you can deduct your interest. How much you can deduct depends on the date of the loan, the amount of the loan, and how you use the loan proceeds.

• To get the full deduction, your mortgage debt doesn’t exceed $1 million ($500,000 if Married Filing Separately) if you got your loan between October 13, 1987, and December 15, 2017, or $750,000 ($375,000 if Married Filing Separately) if you got your loan after December 15, 2017.

If the amounts you entered for principal balance total to more than $750K, TurboTax will limit the deduction.   

Multiple 1098s in TurboTax Online

Multiple 1098s in TurboTax Desktop

[jyeh74]

@DawnC Thank you for clarifying.  So for 2023 tax year, you take the principal balance as of 1/1/23 NOT principal balance as of 1/1/24.  Principal balance as of 1/1/23 was 0.

Because @JulieS said "For the original mortgage, enter the outstanding principal as of January 1 of the current year (ie: 1/1/24 when preparing a tax year 2023 return)."  Probably a typo.

[DawnC]

Yes, but if you took out the loan during 2023, enter the original amount of the loan.   Example, if you took out a $100K on July 7, 2023, the outstanding balance TurboTax is looking for is the full $100K - the balance as of the date you originated the loan (7/7/23).    The original mortgage or a loan that you took out in a previous year would use the principal balance as of 01/01/2023 (the box 2 amount)

Box 2 of Form 1098 shows the outstanding principal on the mortgage as of January 1 of the calendar year of the tax form.    If the mortgage originated during the calendar year, it shows the mortgage principal as of the date of origination.   If the recipient/lender acquired the loan in the calendar year, shows the mortgage principal as of the date of acquisition. 

[jyeh74]

Box 2 doesn’t show anything.  So when I called the bank, they said if you’re doing taxes for 2023, they are asking for the balance as of 1/1/23 which is 0.