I refinanced and have two 1098 forms

[ReneeM7122]

The issue seems to have to do with entering multiple 1099 forms when tit involves a refinance as well as a loan sold to another lender. 

Currently, TurboTax has instructed us to combine multiple 1098s together.   But if your loan is sold, then you don't have two loans - you have one.  The loan was sold outside of your control and the only thing that changes is the bank to whom you make payments.  So you only use the ORIGINAL 1098 for that entry.

Once you're done with the sold loan portion, go ahead and follow these official steps regarding the refinance:

How do I handle multiple 1098 mortgage forms?

If you have multiple 1098 mortgage forms, you’ll enter them one at a time. After going through the steps with the first one, you can add a lender when you get to the Mortgage deduction summary screen. (In the case of a refinance, it's best to enter the 1098 from your original loan before the 1098 from your refinance.)

But, if they're both from the same lender, and one of them has the “Corrected” checkbox marked at the top, enter the corrected 1098 and discard or shred the other one.

What do I do if I have multiple 1098s from refinancing my home debt?

If your total home debt is under $375,000 ($250,000 for married filing separate) there is nothing new for you to do in 2020. Enter each 1098 as you normally would.

Home Debt Over $375,000

Under tax law, you are limited on the amount of home interest you can deduct. The limit is based on the loan amount and date of the origination of debt. We want to make sure we calculate this correctly for you. 

If you refinanced last year, you’ll have a Form 1098 from your previous lender and one from the lender you refinanced with. You’ll need both forms. 

Follow these steps to enter your mortgage information:

1. Gather all of your 1098 forms related to your refinance (the form from your original lender and the form from your new lender)
2. Grab a calculator and add together the box 1 amount from each form. Enter the total in TurboTax as Box 1 Mortgage interest.
3. Add the Box 5 amount from each form and enter the total as Box 5 Mortgage insurance premiums. (If you weren’t required to pay mortgage interest, these boxes will be blank on your forms and you won’t enter anything.)
4. Add the property tax paid from each form and enter it in the Property (real estate) taxes box.

Next, finish adding info for boxes 2, 3, 7, and 11 using Form 1098 for the original loan.

What if I have more than two 1098s?

You should combine all of the 1098s directly related to the refinance and enter it as one 1098.  An example of this is if you refinanced two loans into one loan. Any 1098s not directly related to the refinance should get entered separately.

What if I paid points?

Points on Loans Paid Off in 2020: Enter the points on your 1098 you have started and mark you paid off the loan when promoted.

Points on Loans on New Loans: You will want to enter a separate 1098 to cover these points paid. When prompted, enter 0.00 for Boxes 1, 2, 5, and the Property (real estate) taxes box, and checkbox 7, as you’ve already entered the details on your first 1098. For Box 3, add the date in 2020 when the loan originated.

@Skhan484

[GoneSailin74]

Not always $375k. Perhaps TurboTax should fix this?

https://www.irs.gov/publications/p936

"Mortgages you (or your spouse if married filing a joint return) took out after October 13, 1987, and prior to December 16, 2017 (see binding contract exception below), to buy, build, or substantially improve your home (called home acquisition debt), but only if throughout 2020 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately)."

[RyanFilingTaxReturn]

My second 1098 form (refinance)'s balance is lower than the balance on my first (original) 1098 form. If I combine the 2 forms, what should I enter as the balance? I feel that simply using the original balance isn't accurate?

[KrisD15]

Use the ending balance for the refinanced loan as the ending balance.

Use the beginning balance of the original loan for the beginning balance. 

Only add together the amount of interest paid.

Use the lender information for the refinanced loan since that will carry-over to next year. 

[SK250]

It does not work. Please try it out. I called TurboTax and the problem is still there if you entered two 1098s.

Now I checked my 2019 deduction was not calculated corrected. I have to file an amend to get back 1K. TT sucks. This is last time I am going to use TT 🙂

[JohnB5677]

If you've refinanced or had your mortgage lender changed, the outstanding mortgage principal listed in both of them on Line 2 on the 1098 will be too large.

When you put an outstanding balance in both forms, then the program adds them together and if that number is greater than $750k, then it puts you in the category to "limit interest".

To get that to go away, you need to go back to the deductions section and click on "edit" mortgage interest statement.

Change the line 2 of the mortgage that you no longer owe on (like the one that you refinanced and paid off) to a 0 (zero) because you have refinanced out of that loan and no longer have an "outstanding mortgage principal".

@SK250

[arfa2021]

I have received 5 1098 for 2020. That is because I refinanced couple of times and lenders transferred my loan to other banks multiple times. I must say I have very hard time to enter these 1098 forms many time but TT is showing error. I tried all options mentioned here but no use. I have no option than not using TT for 2020 tax filing. It is shame to TT / Intuit not fixing this issue after so many complaints. 

[ChondelLO]

In the case of a refinance, it's best to enter the 1098 from your original loan before the 1098 from your refinance. Please see the TurboTax Help article below for guidance. 

How do I handle multiple 1098 mortgage forms?

If you continue to have the same experience, please click here to help get you connected to the right person for assistance.

[palmpine7382]

Hi,

I followed the exact instructions provided (Mac desktop version) and am not getting the expected result. The tooltip needs a LOT more clarity.  I'm also getting confused as there seems to be conflicting information being provided in different threads.  Can you please assist?

I received 4 total 1098's as a result of 2 refi's and 1 loan transfer.

- Do I select the checkbox that says "The interest amount is different than what's on my 1098"?  The instructions are telling me to input a number that doesn't match the 1098 and that makes me uncomfortable.

- If we have 2 refi's, then I understand that we are supposed to input the second refi as a separate "Lender".  Can you confirm whether we are supposed to put $1 into Box 2 ("Outstanding Mortgage Principal) or we put the actual Box 2 value as it's shown on the second refi's 1098? (doing the latter is following the tooltip instruction, but gives me an incorrect refund number)

- I understand for each refinance we are supposed to combine the mortgage interest from both 1098's together and input the interest paid associated with the original lender.  What do we do with the 1098 for the refi lender?  Do we input information for that with $0 for interest paid or just omit inputting it entirely?  Seems odd to not input a form at all?

Thanks in advance

@WendyN2 @ReneeM7122 @ToddL68 @ChondelLO 

[karenrner]

With regards to your first question, that is how I did it, and my return was accepted by the IRS and was paid already.  I used the comment "Due to known problem with Turbo Tax when calculating mortgage interest on Refi's" when prompted for explanation.  Not sure if I'll be audited or not, but my overall numbers are correct, so I'm ready.  That being said, this is not professional tax advice.  Your position is more complicated than my one simple refi.  I would consider NOT using Turbo Tax in your situation and turning to a tax guy instead.  FYI: I also looked at my 2019 return, and TT had the same issue.  I am now having to file an amended return to 2019 to get back almost $2k!  Shame on TT for having this problem unresolved for over a year!

[SK250]

Yes by doing that it fixes the problem. Now I found out that same mistake was done in 2019 return. This is hassle and software bug causing so much trouble. Time is money. I’ll probably switch to other platform and see if they handle this correctly. How can I trust the software now? 

[karenrner]

Exactly my feelings too.  I have used TT for years.  Trust in their product is an awful thing to lose. :(  YOU'D THINK TURBO TAX WOULD BE OFFERING US SOME SORT OF REFUND FOR OUR TROUBLE!  ESPECIALLY HAVING TO FILE AMENDED RETURNS ON PRIOR YEARS!!

[GoodTaxTimes]

I think the combining advice is correct.  Here's why:

If you examine the completed tax forms (Sidebar->Tools -> Print Center), with or without IRS schedules, it doesn't actually reference the 1098s anywhere.  It only cares about the interest reported on your 1098s.  In fact, you won't even find your lender's name anywhere on the returns or on the *government* worksheets, nor the loan origination date (this information is likely only relevant to interpret the laws and supporting docs in an audit).  

Instead, I just entered the property street address as the lender, as the numbers/data I'm entering are correct for the given property address, in fact this is more helpful as your'll need to carry forward your *true* first loan origination date if the loan was for more than 750k.

In other words, the tax return itself is fine doing it this way (everything is accurate), you are just choosing to using the worksheet in a way which makes the math come out correctly as TurboTax suggests.

Good luck!

[TryingToUseTT]

I do not know if the recent changes to TT fixed the issue, but I found a method that uses the program as intended and:

• does not involve combing 1098s
• does not involve involved editing in forms mode
• does not involve in changing data that is reported on the 1098s.

I had further complications because I had taken money out over the years for non-house reasons so that partition of the interest should not be deducted.

Here is what I did. 

I entered the lenders in chronological order.  After every lender, I went into Forms view just to verify I was getting the numbers I expected.  The forms I checked were the Ded Home Mort form and the individual lender worksheets.

In my I had 5 1098s.  They were:

• The original loan that I started the year with
• My HELOC
• My First Refi of the year
• A bank transfer of my first Refi to another lender.  This was not my decision and I did not authorize it.  (It is standard practice of the lending industry)
• My 2nd Refi of the year.

Many have said to combine 3 & 4.  This is not necessary if you enter the data correctly. 

Entering data in #4 is confusing because 3 & 4 have the same origination date.  Yes, you should enter the same date for both.  The key is that #4 has an acquisition date.  That is the date that tells TT when that loan servicing was transferred from #3 to #4.

Another confusion thing was the final balances.  If the loan was paid off via refi, the final balance is the principle that was transferred over to the new loan.  You think it would be zero, but if you read the TT interview it tells you to put the last payment, which means the principle that was moved over.  TT knows how do deal with it, because you should have checked the box that the loan was paid off.

As a point of clarification, the answer to “When did you make your final payment?"  It is the origination date of the next loan in the next loan’s box 3.

Finally, a sticking point for me was because I did not use all of the loan proceeds to buy or improve the house (i.e., I have taken money out over the years for other reasons).  When it says the loan, it means all the loans combined (the original and all refis).  It is an aggregate number. 

Let’s say that my previous loan was 400,000, but only 300,000 was used to buy the house or improve it.  Then I refi’d and took out 10,000.  The amount I would report on the refi loan that I used to buy or improve the house would be 310,000 (not just 10,000).  Once again when it says loan it is referring to all previous loans on the house.

Following these methods gave me an accurate tax return without combing or changing data. 

Good luck, it took me hours to figure this out, but the key was checking the forms as I went along every step of the way.

[rcgrosso1]

Turbotax takes multiple 1098s and and treats them as separate loans, increasing the loan amount and creating a calculation error.  This has been know to Intuit for years.  Why is this not fixed? Unacceptable.