Mortgage Refinance Interest

[Tclaypool42300]

I refinanced my house in March of 2019. Owed $161,000. Borrowed on new loan $195,000. I have 2 1098 forms. First one is for old loan with $1706 mortgage interest. Second one is for new loan with $5,996 interest. Last year's return i paid $6900 interest and it was deducted. This year TT only lets me deduct the $1706. Shouldn't I get a deduction for at least a portion of the $5996? And TT won't doesn't show checkbox to say first loan was paid off in 2019.

[DianeC958]

Yes, you can deduct the full $5,996 you paid in interest on the refinanced loan as long as the additional funds borrowed were used to improve the house.  If the additional money you borrowed was used to pay off other debt or for other personal reasons then part of the interest you paid is not deductible.

Please go back through the mortgage section of TurboTax and review your answers to the questions to verify that you answered them correctly.

Link about Mortgage Refinance Deductions

[Tclaypool42300]

I have went back through several times. I did not use the additional money for my home so I understand I can only get partial. I enter the first loan as Original Loan. I enter second  loan as Taking Cash out. It asks if loan is closed on second loan not first. 

[KrisD15]

First, delete both 1098's. Do NOT try to edit them.

Enter the older loan first, enter box 2 as it is reported, 

THERE WILL BE A SCREEN ASKING "WAS THIS LOAN PAID OFF OR SOLD IN 2019?"  CLICK "YES" 

(this screen will not appear if you go back and edit)

Continue through the interview

Next, enter the second 1098

Select that it WAS a HELC

You will be prompted to report the cash taken out and how much was used for the home and how much was used for other things 

TurboTax should make a ratio for claiming the interest. 

[lastTimeUseTT]

I tried for more than 10 times now. 

And this **bleep**y software kills my time. 

I had bought dulex and then premier. 

Never got a window to ask about the "WAS THIS LOAN PAID OFF OR SOLD IN 2019? "

Terrible experience!

[lastTimeUseTT]

I didnot hit AMT.

[ThomasM125]

Sorry you are having a problem with this.

The way I see it, you should get a full deduction for the first loan interest of $1,706. 

For the second one, it looks like $161,000 of the $195,000 loan is allowable for full deduction, or 82%. So, if you multiply the second interest of $5,996 by 82%, you get $4,916 as an allowable deduction.

I know this is a work-around, but you could just enter the second mortgage interest as the allowable amount and indicate that is was not HELOC. The only thing that will show on your tax return is the allowable interest, it doesn't matter how you got to the number.

[NCperson]

@lastTimeUseTT  another method that is probably close to what @ThomasM125 suggested but will be technically exact: 

$161,000 * interest rate * number of days the mortgage was outstanding in 2019 / 365.  

The loan would have amortized (slightly) over the course of the year, but the assumption is the part of the loan that was NOT 'acquisition debt' would paydown first while the $161,000 of acquisition debt doesn't