Deductible Home Mortgage Interest Worksheet

[tqenathan]

Please let us know when Turbo Tax SW come out with a solution! Million of people buying Turbo Tax and I am sure that several thousands people that filing tax ran into this issue and will have many many more people will run into this issue. So please push your company to come up with a solution before people return the software to your company. Thank you!

[RotorJoe1]

Is TT still adding all of the loan values, both the original loan and the multiple 1098s from the refinance of your original loan?  I'm not sure what form to look at to confirm or verify that it's doing the correct math.  I understand the worksheet is available now and looks like I can get passed that missing worksheet error, but I want to know if the logic was fixed in how it combines the amounts?

[barsad]

I believe multiple 1098s started working last week, no need to worry about combining. I recommend deleting everything you have in there and starting fresh, start with the oldest 1098 and end with the newest, making clear when each loan was paid off during the year. That worked for me and I was able to file with four 1098s.

[lh64]

As of yesterday, it was still combining.  I'm using the online version.  To view the worksheet, On the lower left, I went to tax tools>print center>preview>view forms (check box to include govt wks)

[BobbyandFriends]

After following the "requirement" to combine my two 1098s for the year for a mid year refinance the Home Mortgage Interest Worksheet is still not working.  When I check the Form it shows Qualified Loans is $0 so none of the interest is deductible.  I've filled this under "Outstanding Loan balance" along with the home acquisition date.  

Since it's not accepting any of my mortgage interest I'm no longer qualifying for the proper deductions.  Can this form get fixed?  It was actually working back in January when I entered my numbers by hand.

[DMarkM1]

First start by revisiting the "Mortgage Interest" topic and deleting all forms 1098 entered and "Done" to ensure a clean slate.

Revisit the "Mortgage Interest' topic again and add the original form 1098.  Be sure in the follow on questions you answer: 

"Yes" it is the "original" loan

"No" it is not the "most recent" 1098

After answering the questions you will arrive at the "Home loan deduction summary" page, do not click "Done" but click "Add a lender"

Next enter the second 1098 and be sure to answer

"No" it is not the "original" loan

"Yes" it is the "most recent" 1098

This time when you arrive at the "Home Loan deduction summary" page you click "Done"

You will then be prompted to enter the payoff information for the first loan and the year-end (31 Dec 2021 or 1 Jan 2022) balance of the outstanding loan.

[tombones]

I had to dig through your support articles to try to find out the status of this issue. The support topic I'd subscribed to about the mortgage worksheet error simply stopped updating 13 days ago. The reply above makes it sound like the error has been fixed, but it has not.

[tombones]

I attempted the process described by DMarkM1 above, but there is no option to "Add a lender". The mortgage worksheet error appears to still be present, and I'm still getting forced back into the standard deduction (a loss of thousands of dollars from my refund) when I enter both 1098s. Please help.

[DaveF1006]

To clarify, are you using Turbo Tax online or the Software version?

@tombones

[cfelbab]

So near as I can tell they never fixed this issue which is quite disappointing. If you have mortgage balances higher than $1M with more than one mortgage (e.g. a primary and HELOC), the software is incapable of correctly figuring out the proper mortgage interest deduction and if you rely on the software you will pay a lot more tax that you are required to (like thousands of dollars worth!). You can see this error by looking at the mortgage interest worksheets for each lender in that it does not calculate the "average loan balance" which is needed to fill out the deduction proration worksheet for mortgages. As a result, it considers all the mortgage interest is nondeductible. I was able to fill it the form by hand and then override the line on Schedule A for mortgage interest deduction with the correct value and file my taxes but is it very unfortunate that this fairly simple calculation does not work and even worse that unless you understand the tax law there is no indication given that it is doing the wrong thing. Many people are likely going to have paid more taxes than they should have. Intuit needs to fix this issue and make people aware of the problem who are not following this thread.

[tombones]

This is Turbotax Online. cfelbab's post above correctly and succinctly describes the problem. As someone who doesn't know tax law or know how to manually calculate/input the average, I am stuck until this gets fixed.

[RaifH]

If you originally acquired a loan that was subject to the higher $1 million limit prior to December 15, 2017 and have refinanced it in 2021, enter it this way:

1. In the Federal > Deductions & Credits section of your return, scroll down to Your Home and click Revisit/Start next to Mortgage Interest and Refinancing (Form 1098)
2. Edit your existing 1098. You should only have one that contains both loans.
3. Answer the questions and enter the information from your Form 1098s:
   1. Box 1 Mortgage interest - Add the amounts together on both 1098s
   2. Box 2 Outstanding Mortgage Principal - Use the amount reported on your old loan
   3. Box 3 Mortgage Origination Date - Use the original purchase date 
   4. Boxes 5 & 6 - Use the combined totals from both 1098s
   5. Make sure Box 7 is checked
4. Answer What kind of property is this loan secured by?
5. Answer We didn't pay any points.
6. Answer Yes to Let's see if this is the most recent form for this loan.
7. Answer No to Is this the original loan used to buy your property? 
8. Answer Yes to Is this loan a HELOC or a refinance? 
9. Answer No to Did you take cash out? (assuming you did not take cash out when you refinanced)
10. Once you are back in the Home loan deduction summary screen, click Done.
11. Answer NO to Do either of these apply to this loan?
12. Enter the outstanding loan balance on January 1, 2022 in the first field. Leave the second field blank.

Pay particular attention to steps 3 and 11. This will calculate your deductible interest correctly based on the $1 million limit. Although not every answer is consistent with your loan, all the forms reported to the IRS will be accurate. 

@tombones if this is not your situation, please let me know your exact situation so we can figure out how to get it entered correctly. 

[tombones]

Thanks for replying. Here's my situation:

I have three 1098s: Two from the new primary home I bought in May 2021 (the original lender and the loan servicer who immediately bought it) and one from the old primary home I sold in June 2021. Turbotax Online doesn't have any way for me to indicate that one of the homes was sold, or which one is my current primary residence. Consequently, it's miscalculating the input from the 3 forms and sticking me in the Standard Deduction incorrectly, resulting in a reduction in several thousand dollars from my refund.

[RaifH]

TurboTax will calculate the average outstanding mortgage balance as if you carried it the whole year unless you tell it otherwise. In your situation, I would report Form 1098 on your old home as for your second home, and combine the two 1098s on your new home as a 1098 for your primary home. 

For your old home:

1. In the Federal > Deductions & Credits section of your return, scroll down to Your Home and click Revisit/Start next to Mortgage Interest and Refinancing (Form 1098)
2. Add another 1098 or edit an existing one.
3. Answer the questions and enter or verify the information as it appears on your 1098. Enter this as your Second Home. Make sure you have both the box 1 amount and the property taxes if they are reported on the form. If this loan was ever refinanced, use the original purchase date as your mortgage origination date, in spite of what is on Form 1098.
4. For the Outstanding Mortgage Principal in Box 2, we are going to have to do some math. Take the box 2 amount reported, multiply it by the number of months you had the loan, and divide by 12. If you sold the home in June, multiply by 6 and divide by 12, or just divide the Outstanding Mortgage Principal by 2 and report that as your amount in Box 2. 
5. Answer Tell us about any points paid.
6. Answer Yes to Let's see if this is the most recent form for this loan.
7. Answer Yes to Is this the original loan used to buy your property? unless this is a refinance

For the new home, combine both 1098s together:

1. In the Federal > Deductions & Credits section of your return, scroll down to Your Home and click Revisit/Start next to Mortgage Interest and Refinancing (Form 1098)
2. Add a Form 1098. Enter this as your Primary Home.
3. Answer the questions and enter the information from your Form 1098s:
   1. Box 1 Mortgage interest - Add the amounts together on both 1098s
   2. Box 2 Outstanding Mortgage Principal - Similar to the above loan. If you bought it in May, take the reported amount and multiply by 7, then divide by 12.
   3. Box 3 Mortgage Origination Date - Use the original purchase date from the first Form 1098
   4. Boxes 5 & 6 - Use the combined totals from both 1098s
   5. Make sure Box 7 is checked
4. Answer What kind of property is this loan secured by?
5. Answer We didn't pay any points.
6. Answer Yes to Let's see if this is the most recent form for this loan.
7. Answer Yes to Is this the original loan used to buy your property? 
8. Once you are back in the Home loan deduction summary screen, click Done.
9. Answer NO to Do either of these apply to this loan? for both loans, even if it does apply to the old home.
10. For the outstanding loan balance, use the same amount that you calculated as the outstanding mortgage principal above for both loans. For the old home, enter the sale date. Leave that field blank for your new home.

@tombones 

[tombones]

Thank you so much for the clear and thorough explanation. I followed the process you described, and although there were a few minor differences (for example, I did enter the points we paid on the new home that appeared on the 1098, and I was never asked to enter the outstanding loan balance), it nonetheless appeared to correctly calculate the mortgage interest with this method and allowed me to itemize my deductions, yielding a much larger refund. I sincerely hope that future versions of TurboTax will be updated to accommodate this very common tax scenario to make the process less difficult, but I'm glad we were finally able to resolve this and file.