Entering multiple 1098s due to a refinance is incorrectly triggering the $750,000 principal limit on home loan interest deductions.

[charliedavid]

Wouldn't this technically be "lying" on your taxes? Changing arbitrary numbers to satisfy a faulty backend calculation?

[Bostondoc84]

@Cynthiad66 @andrewnagel 

Dear Cynthia,

Thanks for your reply. If you see several of the other threads about this issue, the solution has come up a few times. However, while this may suppress the error it is not ideal for several reasons. Chief among these is that the IRS actually requires you to calculate and report the average mortgage balance held over the year in such cases. A large number of refinances do not simply carry over the prior balance onto the new mortgage, either because additional payments are made or because closing costs are built-in, or because cash is taken out. In such cases, the mortgage balance depicted on the first 1098 is not the same as the average mortgage balance held over the course of the year. Now, this may be a moot point as long as individual is well below the deductibility limit. However, if close to the limit, erroneously just ignoring one of the two mortgage balances on the 1098 will cause an incorrect value to be entered.

My point in all this is simply to say that these workarounds are not ideal, and have the potential to cause less sophisticated users to make errors with significant long-term consequences were they to be audited (or to leave deductions on the table). The reason we all use software to do this is because it is trivial for code to calculate the above data accurately and fill it in. I think it is indefensible for TurboTax employees to be suggesting that users intentionally misreport their 1098 data to the program to suppress an algorithm error. I realize that in the majority of cases this kind of sloppiness may not have practical consequences, but that is no reason not to do it correctly.

[lchan]

following along on this thread as I'm running into the same problem after a refi done in 2020. I knew the numbers I was getting weren't correct. This explains a lot. Now to wait for a suitable solution. I agree, I don't think fudging the numbers to bypass their algorithm is the correct approach here. 

[JantovenNF]

@Bostondoc84 

Agreed - I don't think we should be forced to mis-report our 1098s, etc.

From my understanding, on the desktop version, you change manually override the "average" outstanding mortgage on the worksheet (which is not submitted to the IRS), which will in turn lead to the correct return.  Thus, you can still enter all your 1098 information correctly as you are supposed to (with the outstanding debt listed, etc), but just override TurboTax's average outstanding mortgage calculation on their worksheet.

However, you can only do the above for the desktop version, which is a severe limitation of their service.  I imagine most are using the online version.  They should enable online users to manually edit their worksheet, too.

[lchan]

@JantovenNF  Would you be able to show how to do this using screenshots? 

[austinmquinn]

Is this the official recommendation because it says it wants the mortgage owed on Jan 1st 2020? (before it would have been paid off) Turbotax live chat has not been very helpful in resolving this.

[JamesG1]

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 here.

See also this TurboTax Help.

[rkalnins]

Yup, I see the same problem.  I refinanced a mortgage in 2020 which slightly exceeds $750k. When I put in the first 1098 for the original mortgage, the interest deduction looks reasonably correct.  But, when I put in the 1098 for the refinancing loan, the net deduction actually goes down, which is obviously not correct.   Under the hood, Turbotax is obviously not correctly computing the deductible interest for this case.  I'm using the online version of Turbotax, so I can't override the underlying forms to correct this.  Online user really need a bugfix from the website developers to address this issue.

Help! I cannot file taxes with Turbo tax for 2020!!

[AlanT222]

Some TurboTax customers are experiencing an issue with their Home Mortgage Average Balance. This can cause the Home Mortgage Interest to be incorrectly limited.

If you're experiencing the issue above, please go here to receive email notifications when any updates related to this issue become available.

[MuseN]

I didn't know of this issue and incorrectly filed my multiple 1098s without the mentioned workaround last year.. 

I hope TurboTax would be proactively helping people like me who just trusted the software to work correctly to file the amendment. 

[JamesG1]

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 here.

See also this TurboTax Help.

[Winston886]

I'm having the same problem. Turbo tax would not allow me to use itemize deductions unless I put "0" to outstanding balance for the 1098 forms. It counts my refinance mortgage 2/3 times since I refinanced twice which is over the IRS cap as well.

Holding off filing my tax until hopefully TurboTax fixes the issues soon...

[JoannaB2]

Yes, we are aware of this experience, please clcik here to sign up for updates. Or, you can click here to contact us directly.

[rkalnins]

Can someone in customer support indicate any estimate for when this issue will be addressed in the online version Turbo Tax 2020?  We are days away from the IRS beginning to process 2020 returns, and this is a blocking issue.  Customers will begin to look for other solutions from other vendors if this issue continues to remain unaddressed, and without any given timeline, or status updates.   Looking over the history of these threads, the issue appears to be exist in TT 2019 as well, so this do not give any confidence that the issue will be addressed in time for the 2020 filing season.  Rather than post another link to sign-up for updates, can someone please provide an actual update?

[Cynthiad66]

Some TurboTax customers are experiencing an issue with their Home Mortgage Average Balance. This can cause in the the Home Mortgage Interest to be incorrectly limited.

If you're experiencing  the issue above,  please go here to receive email notifications when any updates related to this issue become available

[edited 2/9/2021 | 12:19 pst]