Mortgage Forbearance Repaid via refinance cash out - Interest claimed on 2021?

[bigdaddymac]

I ended my forbearance period for my mortgage with my lender back in 2021. It started in 2020 and extended into mid 2021. I did this by paying off the balance of interest accrued with a refinance (cash out). Therefore, I received 2 1098's for last year's mortgage interest... one from my previous lender where I had the forbearance period and one from my current lender that I used to refinance. 

My mortgage interest was much higher in 2021 due to the interest payments essentially being delayed from 2020 up until mid 2021. For the sake of simplicity, let's say a typical year without forbearance is about $10,000 in interest for my mortgage. In 2021, my interest paid was $20,000... accounting for most of 2020 and part of 2021. 

My question is, when I deduct my mortgage interest in my taxes, am I hitting a limit of the amount I can deduct? Even though it shows $20,000 in interest deductions, it isn't really affecting my refund that much.

Thanks in advance! 

[RaifH]

The deductible mortgage interest is not limited based on the amount of interest. It is instead limited by the outstanding mortgage principal on all your deductible home loans. For homes purchased prior to December 15, 2017 the limit is $1 million of outstanding mortgage principal and is $750,000 for homes purchased after that date. 

If you are not seeing your taxes move much when you enter your interest, it is likely that you were receiving the standard deduction prior to entering the interest. Once your itemized deductions exceed your standard deduction, you start seeing a reduction in taxes but it will not have any effect until then. If you are married filing jointly, your standard deduction is $25,100, so you will not see any benefit from the first $25,100 of itemized deductions you enter. 

In addition to mortgage interest, itemized deductions include state and local taxes, gifts to charity, and medical expenses that exceed 7.5% of your gross income. 

[bigdaddymac]

This didn't really help or answer my question.

[Vanessa A]

Clarification....What part are you still questioning?