Outstanding Balance on Multiple 1098 (Mortgage Interest Statements)

[Allenusc]

I have already purchased TurboTax for 2019 year from Costco.  My original mortgage lender A sold my loan to a new lender B in February 2019.  Therefore I have two 1098 statements with two redundant outstanding balances which creates a limitation on interest write-off.

Original lender A:

Interest:  $ 2,000 (1 month)

Outstanding Balance:  $ 600,000

New lender B

Interest:  $ 22,000 (11 months)

Outstanding Balance:  $590,000

When filling out the deduction in TurboTax, I entered both 1098 statements, and the combined interest is $24,000 with no issue.

However, I am also required to fill out the outstanding balance for each of the 1098 statements, and the combined outstanding balance is $ 1,190,000.  However, the original lender A outstanding balance is $0 as of February after the mortgage is sold to B, and TurboTax does not allow me to enter $0 for A.

TurboTax uses $ 1,190,000 as my mortgage balance, and this limits the allowable interest deduction.  The tax code limits the balance to $750,000 or $1,000,000 depending on loan initiation date, or the interest deduction is prorated.  

If there a solution to this very common situation?

[DianeC958]

Yes, there is a solution to this issue.

On the mortgage, you refinanced in box 2 it asks for the balance of the loan as of 01/01/2019, since the loan started in 2019 this amount should be $0.

Please review this information and make any changes needed.

[Allenusc]

TurboTax does not allow me to enter $0 for either of the 1098 Box 2.

It gives me an error message that will not allow me to move forward to next step.

[KrisD15]

Please delete the 1098's and re-enter them. Enter zero only for a loan that originated in 2019. 

You may be getting an error for a different reason. There are several questions that are asked only once, and if you  try to edit the 1098, the error remains. 

[CCap]

When I’ve tried to do that, it specifically gives me the error that it will NOT accept 0.
also tricky because box 2 on the 1098 has a value of the debt at the time the mortgage was acquired.  
it doesn’t seem to work for me.  On a side note, would I do the same for a mortgage that was sold to / acquired by another lender?  In my situation, LoanCare bought my loan from QuickenLoans, soon after which I refinanced, and then Chase bought my new loan.  I have 4 1098s, and my total average debt is showing 2.5m when it should be about 600k.  I’m plugging in everything exactly as asked.  It’s killing me!  

[DianeC958]

On the refinanced mortgage Box 2 is asking for the amount of the outstanding balance of the loan as on 01/01/2019.  Since the loan did not start until after that the date the amount in Box 2 for the refinanced mortgage should be $0.  

If you put a balance for the loan in Box 2 for the refinanced loan the computer program will impose the limits on how much interest you can deduct on mortgages.

Link to Deduction Mortgage Interest

@CCap

[CCap]

Thank you for the response!  Unfortunately, TurboTax (CD version, Mac) does not allow me to enter 0 in that box, it gives me an error.  I suppose I could enter $1 but that does not feel right, or accurate.  
I’m also concerned with entering figures in TurboTax that are not consistent with the figures on my actual 1098.

[CCap]

Follow up question:  do I do the same thing for a mortgage that was acquired) not refinanced) by another bank during the year?  Still enter 0 in line 2 even though it’s technically the same mortgage?

[DianeC958]

Yes.  Any loan that began during 2019 should have $0 for an amount in box 2 for the 1098 information.

[CCap]

I ended up just paying $80 for the online version since it’d actually let me (and instructed me) to put in 0 for the balance in box 2 (which the cd version didn’t let me do!).  Now if only I could get TT to give me a refund....

[Allenusc]

Mortgage transfers is a very common occurrence , however, TurboTax did not program this into the software correctly without doubling on the total balance.

The better way is to correct the software code, but here we are asked to manually override the software errors, yet the data we enter will not exactly match the 1098s.

[KrisD15]

Enter the 1098 as they are reported to you. Box 2 should not be blank. Box 2 is the balance of the loan on 01-01-2019 OR the balance of the loan the day it was originated in 2019.

If you are getting an error based on the balance, please follow these directions: 

ONLINE USERS:

Please go back to the Home Mortgage Interest section:

Click Federal on the left side-bar

Click Deductions & Credits along the top

Scroll down to “Mortgage Interest and Refinancing (Form 1098)” Click Edit/Add

Scroll down the “Here’s your 1098 info” screen and click Done.

Next screen asks “Do any of these situations apply to you?” Select “Yes, one or all of these situations apply to me.” and Continue.

On the following screen, you will see the “Original amount”.

Enter the amount you can claim as a Home Mortgage Interest deduction in the “Adjusted amount” box. The Adjusted amount cannot be larger than the original amount or you will receive an error when trying to file. Instructions on who needs to adjust interest and how to calculate are available by clicking the blue “Help me figure this out” link.

DESKTOP USERS:

Go into Forms (top right)
Enter the amount on Tax & Int Wks
Mortgage Interest Limited Smart Worksheet section
Line A2

OR

Step by Step

Federal

Deductions & Credits

Mortgage Interest, Refinancing and Insurance Click Update

Click Done

Click Yes, one or both of these situations apply to me. And Continue

Enter the Adjusted amount and Continue

[Allenusc]

What about:

TURBO TAX

Fix the software bug.

[KrisD15]

If you get an error concerning the balance, please follow these directions:

ONLINE USERS:

Please go back to the Home Mortgage Interest section:

Click Federal on the left side-bar

Click Deductions & Credits along the top

Scroll down to “Mortgage Interest and Refinancing (Form 1098)” Click Edit/Add

Scroll down the “Here’s your 1098 info” screen and click Done.

Next screen asks “Do any of these situations apply to you?” Select “Yes, one or all of these situations apply to me.” and Continue.

On the following screen, you will see the “Original amount”.

Enter the amount you can claim as a Home Mortgage Interest deduction in the “Adjusted amount” box. The Adjusted amount cannot be larger than the original amount or you will receive an error when trying to file. Instructions on who needs to adjust interest and how to calculate are available by clicking the blue “Help me figure this out” link.

DESKTOP USERS:

Go into Forms (top right)
Enter the amount on Tax & Int Wks
Mortgage Interest Limited Smart Worksheet section
Line A2

OR

Step by Step

Federal

Deductions & Credits

Mortgage Interest, Refinancing and Insurance Click Update

Click Done

Click Yes, one or both of these situations apply to me. And Continue

Enter the Adjusted amount and Continue