Refinanced mortgage 1098 messing up deduction from original loan

[calebmil]

The advise to zero out the outstanding principal doesn't hold water.  TurboTax won't let you enter a zero value in that field.  The problem is that TurboTax is not recognizing the pay-off date is within the tax year and entering zero principal balance on the mortgage interest worksheet which we are no longer allowed to edit.  Way to go Intuit!  Something so simple that has worked for years broken by outsourced coding once again!

[DianeW777]

Thank you for providing this information. We are aware of this experience. Please sign up for email notification when an update related to this issue is available here.

If you choose to move forward with your return and if you have a mortgage debt that is below $750,000, (or $1M for grandfathered debt incurred on or before December 15, 2017) this means all of the mortgage interest would be allowed to be used on your itemized deductions as long as there was no cash taken out that was not used on the home (all borrowed funds were used to buy, build or improve the home). If this is your situation then enter the mortgage debt for Form 1098 with the current lender, and then enter $1(since zero didn't work for you) for the second or former lender in that Form 1098. This will provide the correct amount of allowed mortgage interest deduction.

You may want to delete them first to begin again and also clearing your cache and cookies is a good ides (regularly).

Here's how to enter your mortgage interest statement in TurboTax:

1. With your return open, search for 1098, press enter and select the Jump to link in the search results.
2. Follow the instructions to enter your 1098 info.
   • For more information: IRS Publication 936
3. Be sure to review your answers to the questions on the image below, answer based on your situation.

[Lfried3]

Here's the thing:. I shouldn't have to enter false or inaccurate info into Turbotax to get my mortgage interest deduction calculated correctly...

BC then I'm lying when I verify before filing that all info is true and correct.

[LinaJ2020]

If you have more than one 1098 form, I will recommend you to combine all 1098 forms and enter as one. I am attaching a TurboTax link for the instructions how to do claim your mortgage interests.  Click here:

Multiple Form 1098s

For tax years prior to 2018, your mortgage interest deduction is generally limited if all mortgages used to buy, construct, or improve your first home (and second home if applicable) total more than $1 million ($500,000 if you use married filing separately status). Beginning in 2018, this limit is lowered to $750,000.  For more information about the mortgage interest deductions, click here: Mortgage Interest deduction

[backspin3]

This is a terrible advice (combining 1098s) to mitigate a TT software product issue/bug that's taking weeks to fix. I can't believe TT is giving this advice to users to cover its own problem.

Seriously ready to switch to other product.   

[calebmil]

The recently released fix helps some but STILL does not fix the whole problem.  Now I can show that my mortgage was refinanced but the calculation for the months outstanding is incorrect.  It looks like the calculation is using the mortgage origination date minus the end date instead of January 1, 2020 minus the end date when calculating months loan outstanding.  If a mortgage was paid off in 2020, the number of months outstanding should be the number of months since the beginning of the year.

ex 1.  Mortgage originated on 8/7/2018, paid off on 2/14/2020 should at most have a months loan outstanding of 3.  TurboTax says 12 months.

ex 2. Mortgage held temporarily by refinance company for six days until the loan was sold origination date of 2/14/2020 and pay off date of 2/20/2020 should show at most one month outstanding (really should be zero).  TurboTax says 11 months.

[ReneeM7122]

Here is the latest information regarding the handling of refinance and multiple 1098 mortgage forms:

How do I handle multiple 1098 mortgage forms?

 If you have multiple 1098 mortgage forms, you’ll enter them one at a time. After going through the steps with the first one, you can add a lender when you get to the Mortgage deduction summary screen. (In the case of a refinance, it's best to enter the 1098 from your original loan before the 1098 from your refinance.)

But, if they're both from the same lender, and one of them has the “Corrected” checkbox marked at the top, enter the corrected 1098 and discard or shred the other one.

What do I do if I have multiple 1098s from refinancing my home debt?

If your total home debt is under $375,000 ($250,000 for married filing separate) there is nothing new for you to do in 2020. Enter each 1098 as you normally would.

Home Debt Over $375,000

Under tax law, you are limited on the amount of home interest you can deduct. The limit is based on the loan amount and date of the origination of debt. We want to make sure we calculate this correctly for you. 

If you refinanced last year, you’ll have a Form 1098 from your previous lender and one from the lender you refinanced with. You’ll need both forms. 

Follow these steps to enter your mortgage information:

1. Gather all of your 1098 forms related to your refinance (the form from your original lender and the form from your new lender)
2. Grab a calculator and add together the box 1 amount from each form. Enter the total in TurboTax as Box 1 Mortgage interest.
3. Add the Box 5 amount from each form and enter the total as Box 5 Mortgage insurance premiums. (If you weren’t required to pay mortgage interest, these boxes will be blank on your forms and you won’t enter anything.)
4. Add the property tax paid from each form and enter it in the Property (real estate) taxes box.

Next, finish adding info for boxes 2, 3, 7, and 11 using Form 1098 for the original loan.

What if I have more than two 1098s?

You should combine all of the 1098s directly related to the refinance and enter it as one 1098.  An example of this is if you refinanced two loans into one loan. Any 1098s not directly related to the refinance should get entered separately.

What if I paid points?

Points on Loans Paid Off in 2020: Enter the points on your 1098 you have started and mark you paid off the loan when promoted.

Points on Loans on New Loans: You will want to enter a separate 1098 to cover these points paid. When prompted, enter 0.00 for Boxes 1, 2, 5, and the Property (real estate) taxes box, and checkbox 7, as you’ve already entered the details on your first 1098. For Box 3, add the date in 2020 when the loan originated.

[samrom90]

@ReneeM7122 I have two questions

1. If I enter only one 1098, which lender do I put in as the lender?

2. Does TurboTax's calculation guarantee and its max refund guarantee still cover this if TurboTax is forcing its customers to do their own calculations?

[robot9]

Is the issue described in this thread being resolved? I got an update of my TurboTax Premier this Friday; however, the issue is still not fixed even I followed the instruction to first add Form 1098 (original loan initiated in 2015) and then the second 1098 (refinanced in 2020). I still got half of the interest I paid in 2020 (from both Forms 1098) instead of all interest from my original loan (original purchased loan in 2015) and portion of interest from my refinanced loan in 2020 (the amount should be the interest paid to the refinanced loan in 2020 x ($750,000 / outstanding mortgage principal in Box 2 of Form 1098)). Please let us know when TurboTax will update the software to address this issue.

[JamesG1]

TurboTax recommends entering multiple 1098 for mortgage interest one at a time.  See this TurboTax Help.

Some TurboTax customers are experiencing an issue with their home mortgage average balance. This can cause the home mortgage interest to be incorrectly limited.  This may be affecting your tax return.

Please sign up for email notifications when an update related to this issue is available.

See this TurboTax Help.

[Soundview]

Where did you come up with the $375,000 figure? I find nothing elsewhere to corroborate that figure. For married filing jointly the number I’m seeing from IRS Publication 936 and everywhere else is $750,000. Please explain. I agree with others who wrote they aren’t interested in a work-around solution to resolve this, it needs to be programmed correctly. Otherwise, those of us who refinanced twice in 2020 (chasing lower rates) will have to abandon use of TT for filing. I’ve been using your program for many years but never experienced a glitch like this.

[robot9]

We did try to enter Form 1098 one at a time given that I have 2 Form 1098. I got more refund if I only entered the Form 1098 from 2020 refinanced loan (no cash-out, loan amount > $750,000) than if I entered my 2 Form 1098 one-by-one (1 Form 1098 from my original loan initiated in 2015 and 1 Form 1098 from my refinanced load in 2020). When I entered 2 Form 1098, the interest deduction is a half of the combined interest I paid on these 2 loans. I don't think the workaround is working for me as I spent more a few hours to try it.

[sjkullberg]

Yes, I am having a similar problem with multiple 1098s, combination of 2 dwellings, a refinance, and a change in mortgage servicers.  The system thinks that I am exceeding the 750,000 limit and is restricting the donations.  Please fix this problem quickly!  Also, when I look at the Mortgage interest worksheet, the months are all wrong and it will not allow me to fix them.  Where do you input that information?

[Lfried3]

Is this a way for TurboTax to try to force a ton of homeowners to use their new we'll do your taxes for you option?  there seems to be no way within the software to enter your 1098 correctly and truthfully and get the correct mortgage interest deduction.

[JohnB5677]

Some TurboTax customers are experiencing the following error message when running the Federal Error Check 

Check This Entry: Tax and Interest Deduction Worksheet: Limited Interest and Points must be entered

If you're experiencing  the error above,  please go here to receive email notifications when any updates related to this issue become available.

As a work around  you can consolidate the 1098's and get an accurate result.

• Total all of the Box 1 Mortgage Interest received .
• Use the entry in Box 2 Outstanding Mortgage Principal from the most recent mortgage.
• Total all of the Boxes 3,4 & 5
• Enter only the most recent mortgage points for Box 6.  (Any previous points will be deducted when those mortgages were closed.)