Does anyone know where I need to input the refund of overpaid Interest from our 2nd Mortgage (HELOC) in Turbo Tax?

[sears]

I already added the mortgage interest and tax information on the 1098 forms inside of turbo tax but I do not see a Line 4 to input the overpaid interest.  Please advise

[JohnB5677]

You should first confirm that the 1098 that you have includes the excess interest that you paid.  If it does not, you do not have to do anything.  It is a refund of money you already paid taxes on, and is not taxable.

If the 1098 does include the refunded amount. 

• You should enter the the interest less the amount refunded in Box 1 of the input screen.
• Check the Box below that says The interest amount I entered is different than what's on the 1098
• After you [Continue] 
• There is a place to explain why there is a difference.

[sears]

Hi JohnB5677,

Thanks for responding.  Please see below what my 1098 says exactly and then confirm for me if your answer remains the same.

2020 - 1098      Mortgage Interest Statement for our HELOC

Box 4    Refund of overpaid Interest      $22.42

Box 7  Address of Property securing mortgage is the same as Payer's/Borrower's Address...Yes

Total Box 1 Interest      .00

I was just told by another expert that I had to file this under Misc Income..so confused!

[JohnB5677]

If the interest refund is for interest paid in tax year 2020, you do not have to do anything.  However,  If you had the benefit of getting a tax break in a previous year, and you itemized deductions it will be taxable.

The IRS instructions state:

Box 4. Do not deduct this amount. It is a refund (or credit) for overpayment(s) of interest you made in a prior year or years.

If you itemized deductions in the year(s) you paid the interest, you may have to include part or all of the box 4 amount on the “Other income” line of your 2020 Schedule 1 (Form 1040).

No adjustment to your prior year(s) tax return(s) is necessary. For more information, see Pub. 936 and Itemized Deduction Recoveries in Pub. 525.

If you do need to post this go to:

• Income & Expenses
• Scroll down to Less Common Income
• Select Reimbursement deduction from prior year
• Other Itemize Deduction
• Enter the amount

[sears]

I just found a letter in the back of the envelope that contained the 1098.  I apologize

It says the following:

A credit in the amount of $23.28 was applied to your account to reimburse you for the overpaid interest.

a portion of this refund in the amount of .86 is interest paid as a benefit to you.  This refund may be reported on an IRS 1099-INT Form in January 2021 for Tax Year 2020.

Additionally, $22.42 of this refund may be reported in Box 4 of your 1098 Form in January 2021 for Tax Year 2020

[Opus 17 · Accepted solution]

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@sears wrote:

I just found a letter in the back of the envelope that contained the 1098.  I apologize

It says the following:

A credit in the amount of $23.28 was applied to your account to reimburse you for the overpaid interest.

a portion of this refund in the amount of .86 is interest paid as a benefit to you.  This refund may be reported on an IRS 1099-INT Form in January 2021 for Tax Year 2020.

Additionally, $22.42 of this refund may be reported in Box 4 of your 1098 Form in January 2021 for Tax Year 2020

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The $22.42 is a refund of overpaid interest.  It is taxable if you got a tax benefit from it in the past.  For example, if you regularly deduct your mortgage interest, then this $22 was probably a beneficial deduction in 2019 or an earlier year.  If it was a beneficial deduction before, the refund is taxable to you now.  Enter it as a taxable recovery (refund of a previous deduction) in the Other Income section.  The interest on the $22 (amounting to a few cents) is paid to you or credited to your account in 2021, so it will be taxable on your 2021 return.

If you did not receive a benefit from deducting mortgage interest in the past, then it is not a taxable recovery now. 

[sears]

Thank You!