I refinanced twice and have three 1098 forms

[smarickson]

I refinanced twice in 2019 and received three 1098 forms. When entering the two new loans’ 1098 forms, TT says to leave box 2 (outstanding mortgage principal) empty, as the loans were originated after Jan 1, 2019. If I do this, the main page of the 1098 deductions where it shows the summary of all three, has a “needs attention” next to those two 1098. If I go in and add the amount that is in the 1098, however, the “needs attention” goes away. Should I move forward and leave the “needs attention” there or should I fill in those boxes with the outstanding mortgage principal?

Also, in this scenario, which of the three 1098 would I select the option that TT asks for to be the original loan used to the purchase the home? The most recent refinance? Or the original one before any refinancing?

[DianeC958]

For the two loans that originated in 2019 the amount for Box 2 is $0. With the two new loans there was not a principal balance on 1/1/2019 which is the information in box 2 should be.

If you refinanced your house and took out additional money the full amount of the interest is still tax-deductible as long as the funds were used to improve the house.  If any additional money was withdrawn and used to pay other debt or for other personal reasons then the interest paid on that portion of the loan is not tax-deductible.

Link to Deducting Mortgage Interest

[smarickson]

Thanks Diane, however on my 1098 from my lender, they did list an amount in box 2, and if I don’t enter that into TurboTax, it has a “needs attention” next to each of the 1098 after I am done entering them. 

At the bottom of the 1098 from my lender, it says “Box 2. Shows the outstanding principal on the mortgage as of January 1, 2019. If the mortgage originated in 2019, shows the mortgage principal as of the date of origination.”

Should I ignore TurboTax’s suggestion of leaving it blank, and put the values in, so that the software doesn’t tell me “needs attention” for leaving them blank?

Neither of these were cash out refinances, and both were with the same lender. 

[DianeC958]

No, you do not want to put a value in box 2 other than $0 because otherwise, the software may limit the amount of mortgage interest that you can deduct on your return.

If you have more than $750,000 in mortgage debt the interest on the amount of debt over that is not deductible.  By putting information into box 2 of the amount of the loans the program will add them all together which may limit your deduction. 

Since you were just refinancing the refinanced loan did not have balance for the loan at the beginning of 2019.

[klucci19]

The suggestion is to put $0 in box 2 for the two 1098's in which the loans were paid off. The program will not allow me to put $0. I put $1 instead and that fixed my average mortgage balance. Why doesn't TT have a box for having paid a loan off in a refi? I think having to put information in that is not in line with the tax documents sent by the Lender is ridiculous. Is this going to cause problems with my filing?

[WendyN2]

No, it won't cause a problem with your filing as a dollar won't affect your actual "bottom line" (tax bracket). 

[Rechelle2020]

Unfortunately, when you let TurboTax lead you through the process of entering Home Mortgage Interest, it does not ask very important questions for multiple 1098s on the same primary residence. 

On the actual form, there is a box for indicating that the loan was paid off by a refinance, which was my situation. I entered all the information correctly in the guided process, and didn't discover that those entries resulted in TuboTax treating my original construction loan and the refinanced loan after we moved in to our new home as combined loans instead of subsequent loans, and I ended up being limited on the interest we paid by about $4,000. TT automatically entered the form leaving out very important info such as the fact it was refinanced, and the payoff date, and that the outstanding balance at the end of 2020 was $0, While the current mortgage is the ONLY loan that had an outstanding balance at the end of 2020.

[Stryker15]

How did you get around this? I am in a similar situation: construction loan and converted permanent mortgage on the same house, with 2 total 1098 forms.

[Rechelle2020]

I have 2020 TurboTax Deluxe, so I apologize if you don't have access to the same options in online version or different versions of TT. When I open my return, I have menu options on the left portion of the black bar at the top, "Show Topic List, Print Center, & Help Center on the right portion of the black bar, and 3 white icons on the right in the blue bar that shows Federal & State outcomes under the black bar. The first white icon is "Forms" and it allows me to go directly to any of the forms in my return to make edits manually from there. I went to the Mortgage Interest Worksheets and was amazed at the amount of information I was able to enter manually that I was not guided through when I originally was entering information for my tax return.

So, for anyone who can find a way to enter information directly into the forms, I urge you to do so for multiple 1098s before you e-file and make sure that your mortgage interest is not being limited on your schedule A for Subsequent loans that would add up to more than $750K!  Apparently, the default method in Turbo Tax is to combine multiple 1098s as concurrent loans because it does not ask for the delineating details that would show the difference between concurrent and subsequent loans!

Hope this helps!