The calculated amount in the "total of your home acquisition debt on date it was last secured by your home" is the SUM of original + refi loan. Is this a system glitch?

[VictoriaD75]

The limit on the amount of interest has changed under the Tax Cuts & Jobs Act. The interest deduction pre-TCJA has been available to qualified mortgage debt up to $1 million ($500,000 married filing separately).

Through 2025, the TCJA has lowered the amount of qualified mortgage debt to $750,000. For qualified mortgage debt incurred on or before December 15, 2017, the $1 million limit remains in place, thus "grandfathering" existing mortgage debt.

The software may be adding the two together, so you need to indicate whether or not you exceed the limits discussed above.

For desktop versions:

• In Forms view, locate and click on Tax & Int Wks on the left from the forms list
• On the form, scroll to Mortgage Interest Limited Smart Worksheet
• Click on NO to the right of the question, Does your mortgage interest need to be limited

For online versions, after entering the 1098 interest information, continue through the screens and TurboTax will ask you if the interest needs to be limited.

[NCperson]

it's correct, assuming any cash out on the  refi loan was all used to substantially improve your home

example: 

original  mortgage: 400,000

5 years later, the remaining balance was $350,000 and I did a cash out refi to bring the balance up to $500,000.

Of the $150,000 of cash out, $100,000 was used to improve my home, the remaining $50,000 was used for vacations, a new car and the like

the acquisition debt is now $450,000 and the 'equity' debt is $50,000.  90% of the interest would be tax deductible. 

[pk]

@oleg515 , while I agree with both @NCperson  and @VictoriaD75 , I just wonder  if there is a different reading of the question.  As I read it, to me it is a situation where Tax Payer A, had a home mortgage  remaining balance of $400,000 at the start of the year.  On June 30th. the mortgage was refinanced for $350,000.  In this case  the average  loan balance for the year is  (400,000  X 6 + 350,000 X 6 ) / 12  = (2,400,000 +2,100000)/ 12  = $375,000  for purposes of qualifying mortgage interest deduction.  IT is NOT the sum of two  mortgage outstanding balances.

And clearly per @NCperson , if there is cash-out  and the  excess  amount is not used for qualifying purposes, then one has to make required adjustments to compute the average balance and thereby allocate  allowable  interest for deduction.

Am I reading the question wrong ?

[jc105]

I have the exact same problem. I refinanced a mortgage without taking money out, and it seems the TurboTax software is adding all the mortgage principals from all my 1098 forms as if they were all ongoing different individual mortgages. In order to see what was going on, I paid for TurboTax to get the Schedule A worksheet printout and it confirmed my suspicion. I've tried just about every combination of options to try and tell it that it should only use the principal from one of those 1098s but to no avail. This seems like a serious bug. If it doesn't get fixed soon I'll be asking for a refund, as I can't file my taxes as they currently stand.

[jlbrick]

This is a known issue that Turbotax is attempting to suppress rather than fix 

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/re-why-was-my-topic-about-the-mu...

[JamesG1]

@jc105

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.