Refi - average mortgage balance calculation is wrong for 2021 Tax year

[olipetry]

Hi.

I just followed the instructions on how to enter multiple 1098s for a mortgage that was sold off several times in 2021. After I enter the 1098s and make sure that the mortgage that was sold off has an ending balance of 0 I get somewhat of a refund (still to low). Once I then follow that with the additional information in the subsequent step that the original mortgage is dated back to 2019 my refund disappears and instead I owe taxes when it should have increased since I can write off the interest on the first 1M. 

Reading through these forums this seems to have been buggy for years now and I am disappointed to see that it is still broken for Tax year 2021.

How can I get the proper deductions for both Federal and State?

Oli Petry

[DianeW777]

You can get the right results for both federal and state by entering the mortgage interest using the method below.

What if I have more than two 1098s?

You should combine all of the 1098s directly related to the home mortgage and enter it as one 1098.  A sale of mortgages is a perfect example of when this will be the best action. The key is that all of your mortgage interest is included with your tax return.  Keep all of your Forms 1098 with your tax return for the details.

Add each box that has an entry and enter it in the same form with the mortgage interest. 

NOTE:  The outstanding loan balance should be the actual loan balance, do not add that together from each form.  Use the most recent lender's loan balance when requested for that figure. 

[olipetry]

Unfortunately, that doesn't work either. I tried it and the issue is being introduced in the step after adding the 1098 when I enter the date the house was originally bought. Once I add my purchase date which was before 2017 it then recalculates the deduction and my estimated refund drops by a few thousand $ instead of increasing (allowable base should move from 750K to 1M so it should increase). 

Is there a way to see the actual worksheet that is being used to calculate the allowable deduction? Just seeing what is visible to me I wonder if instead of adjusting the base to 1M there is a bug that adjusts it to 0.

[olipetry]

I just removed all 1098s again and re-entered everything while having an agent on the line. Good news is the issue I was facing yesterday seems to have been resolved and the entry now worked as expected.

Oli