How to Resolve Pub 936 Mortgage Deduction Bug for Tax Year 2021

[rjthomp]

The software incorrectly fills out the Pub 936 mortgage deduction worksheet when user has two 1098 forms for mortgage interest, one for a mortgage acquired before 2017 (but after 1987) for < $1,000,000, and one for a mortgage acquired after 2017 with principal > $750,000 (in the case where a home is sold and a new home is purchased).  It sums both principal values under “mortgages acquired after 2017”.  When the new, more expensive home is purchased late in the year, and very little interest is paid, it erroneously scales the fully allowable mortgage interest from the mortgage acquired before 2017 by the factor of the new 750K mortgage deduction limit over the current mortgage principal.  This is incorrect.

Even worse, “completecheck” notices this error but gets caught in an endless loop because it points to the top of the Pub 936 worksheet (where filers’ names are listed) as in error, and no fix to names solves the problem. So then turbotax never exits complete check and you cannot file.


The software incorrectly fills out the Pub 936 mortgage deduction worksheet when user has two 1098 forms for mortgage interest, one for mortgage acquired before 2017 (but after 1987) for < $1M, and one for a mortgage acquired after 2017 with principal > $750K  (in the case where home is sold and a new home is purchased).  It sums both principal values under “mortgages acquired after 2017”.  When the new, more expensive home is purchased late in the year, and little interest is paid, it erroneously scales the fully allowable mortgage interest from the mortgage acquired before 2017 by the factor of the new 750K mortgage deduction limit over the current mortgage principal.  

Even worse, “completecheck” notices this error but gets caught in an endless loop because it points to the top of the Pub 936 worksheet (where names are) as the error, and no fix to names solves the problem. So turbotax never exits completecheck and you cannot file.

[RaifH]

The Mortgage Interest Worksheet is causing errors because the Box 2 Outstanding Mortgage Principal amounts on Form 1098 are adding up to more than $750,000. This is lowering the deduction that you may be eligible for if you are itemizing deductions because the finalized worksheet is not estimated to be available until February 17, 2022.

For more information on the limit to mortgage interest deductibility, see IRS Publication 936. Since you did not carry the new mortgage for the entire year, you can calculate the average mortgage balance using the method prescribed in the IRS Publication, but the finalized worksheet should do that automatically. You will need to enter the loan balance on January 1, 2022, and make sure you enter the loan origination date in box 3. If you do not still own the home of the first mortgage, you will need to know the sale date and the amount of principal still owed on that date.