How do I handle multiple 1098 forms when I sold a home?

[solteroblues]

I sold a home last year, bought a new one.  The new loan was bought out, so I have 3 1098 forms.  If I enter all 3, I'm told that the mortgage value was over $750,000 so I can't count PMI, even though I only ever owned 1 home at once and it was much, much less than that level.  How do I enter that so I can count the PMI?

[solteroblues]

actually, I meant it limits my interest that I can deduct, but still, my home only has a loan value of half the maximum $750,000

[KrisD15]

Please make sure the 1098 from the house you sold has an ending balance of zero. 

Make sure you then enter the loan that was sold, and be sure to select that it was sold in the year. 

Lastly, enter the most recent 1098. 

"When entering the 1098 Mortgage Interest Statement enter the 

Outstanding principal as of 1/1/2019 for the house you sold, and zero as the ending balance.

Since you took out the new loan after January 1, 2019, then leave this field blank for that 1098

Was this loan paid off or refinanced with a different lender in 2019? Answer YES

If you paid off your loan this year, we need its final principal balance. This is the amount you owed before you made your final payment, without interest included."

[crbolen1]

I have the same situation. 

Where on the 1098 form should I expect to see an ending balance of zero for a sold home?  More importantly, where do I enter this information in TT or tax forms?  Thanks.

[JohnW222]

Form 1098 doesn't record an ending mortgage balance.

To enter your home sale information in TurboTax Online,

1. Go to Tax Tools.
2. Go to Tools.
3. Go to Topic Search and type in "sale of home."
4. Select "sale of home", and click GO.

This will take you to the interview where you can enter your relevant information.

Please see the TurboTax Help article “Is the money I made from a home sale taxable?” for more information.

[jsmith123]

I have the same issue, did everything noted above and still it has the total indebtedness adding the two principal residences together?

[JohnB5677]

The mortgage issue can be solved by realizing that when you get a new mortgage the old one will have been paid off.

• The mortgage that you had at the end of 2019, (1st mortgage) will have a principle balance of zero, because it was paid off to secure the 2nd.
• The second mortgage will also have a principal balance of zero.  Because it was paid off to secure the 3rd mortgage.
• Finally, the mortgage you currently have (3rd mortgage) will reflect the principal as of 01/01/2021.

The IRS instructions for completing Form 1098 state that box 2 should be the amount of principal outstanding on the mortgage as of January 1, 2021.  If the loan was no longer being serviced by that company, there would be no outstanding principal on that mortgage and the amount should be "0".  

Entering '0' into box 2 in your tax return is the correct way to handle a loan that has been closed out.

To enter your 1098 Mortgage Interest statement.

1. Log into TurboTax
2. Select Deductions and Credits [Review/Edit]
3. Mortgage Interest and Refinancing (Form 1098) [Edit/Add]
4. Add a other 1098 or select your bank
5. Continue to follow the interview

Note: if you enter your property taxes from your 1098 you will not have to enter them again in the property tax section

[jsmith123]

@JohnB5677 

Thanks for the reply!

So my 1098 (provided by the bank) does not have $0 in Box 2, but you are suggesting that it is incorrect or that I should over-write it and enter $0 in TurboTax? 

That works to an extent. However, then when I put the 1098 in for the current (new home) which is above the $750K threshold, it is coming up with the allowable rate and then applying it by ALL interest on both 1098's. Which I believe is incorrectly decreasing the amount that should be deductible.

IMO it should be:

1.) Mortgage that was below the threshold - 100% of this interest is deductible.

2.) Buy new house, mortgage is above threshold - do the worksheet to come up with reduced interest allowed to be deducted.

Let me know your thoughts 

[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.

See this TurboTax Help.

[dj2009]

I sold my home in 2021 and it was paid off (no capital gains tax rules apply) and bought a new one. I have two 1098 forms on my old one the I have a principal of $350k but in box 10 it says principal paid $350k. Do I enter $0 in box two for the old loan or should I enter the full $350k in box 2. 

[AmyC]

No, you enter the $350k or the balance on Jan 1, 2021 to properly calculate. A zero is not correct.

@dj2009