turbo tax not properly calculating refi average mortgage balance

[JoeSqee]

Hi Joanna,

  I understand I need to report it all, and I am. The problem is TurboTax isn't doing the math correctly. My situation - I refi'd the original mortgage and a HELOC totaling $700k with a new mortgage at $800k. My average mortgage balance for the year is less than the $750k duduction limit. The problem is TurboTax treats it as if I had $1.5 million in mortgages and is only letting me write off half of it, because of the $750,000 limit. I know this is not correct but so far haven't found a solution. Several people are having the same issue. 

[MeshmeZ]

ya, that workaround makes zero sense... especially combined with the response to report all your forms, but also combine them all as one.

 As far as I can tell, this was an issue last year as well... Really disappointed in turbo tax.  About to use another method.

[MeshmeZ]

The links from the "experts" above and the email notification for said links say this has been resolved with an update. IT HAS NOT BEEN RESOLVED. The exact same thing is still ongoing.

[JoannaB2]

Some Turbo Tax 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 return. See this link  for what to do if you have multiple 1098s. See also this Turbo Tax Help.

[MeshmeZ]

Seems like @JoannaB2 is likely a bot, seeing as she's posting the same info that has been posted in this same thread and does not work. 

[JoeSqee]

Lockitdown's solution worked for me. I'm not a tax expert. I read IRS publication 936. On page 13 of pub 936 the directions for calculating the average balance is explained, and it lines up with this solution. 

  I also figured out how to edit the forms on the Mac CD version of TurboTax - you have to go to the form, click on the box you need to change, then go to the Edit menu and select 'override'. I did not have to fix the box on Schedule A - once I corrected the average balances of the mortgage everything propagated through the forms and worked correctly. 

  I don't understand why TurboTax still hasn't fixed this bug, but I imagine it is effecting millions of people that refinanced in 2020 to take advantage of the historically low interest rates. 

[mike_s_lee]

The averaging algorithm is wrong for re-fi's.  This needs to be fixed.

Using round numbers for example

In 2020

Loan1 Jan-Mar $1M

Loan2 Apr-Dec $1M

At no point was I  carrying both loans, so average balance should not exceed $1M\

I can only claim $750k, so factor is 0.75 ($750k/$1M).  I can deduct three quarters of my interest

TT's brain dead method assumes I have two loans each with average balance $1M.  So TT average balance is $1M+$1M=$2M!

Factor is now $750k/$2M or 0.375.  I can deduct a bit more than a third of my interest payments.  THIS IS TOTALLY WRONG!  TT really needs to fix this

[MeshmeZ]

Yep, and from what I can tell from searches, they had the issue last year as well. So it seems they don't care. Turning into Turbo Trash. 

I ended up doing it manually as outlined in this thread. Hopefully it was right, but can we trust any of the rest of the calculations? I'll be finding another tax prep method next year. This is BAD. It started to go downhill the year they changed what you can do with deluxe, to force more people to buy the more expensive version. 

[Grady0124]

I think Lockitdown and Joe Sqee have the right idea.  Need to use the edit/override method, although I think each of our issues are a little different.  This problem has obviously been going on for over a year, so Turbotax has a lot of audacity to say they expect to have the bug fixed soon, especially since taxes were originally supposed to be in by next week!!!   Why didn't they fix it this past summer or fall???   Turbotax should be totally embarassed!!!   I saved close to $6,000 by overriding their mistakes!   No, I am not a Tax authority, but I read the IRS booklet carefully, and it is actually quite clear, with appropriate examples.

[gamit]

How do I edit the worksheet manually in TT Premier Online

[DaveF1006]

It depends. Instead editing the worksheets, I suggest combining the two 1098's into one. For the loan balance, record $747,713 and for the loan origination date, you will record the original date in 2019. You can combine the mortgage interest, property taxes, on the one1098.

Don't try to edit the forms themselves as this can create problems.

[Grady0124]

To edit manually, first click on the item you wish to change.  Next, click on edit in the upper left portion of your screen, then click on override.  Now you can change the incorrect number.  I t should carry through to other appropriate forms.  Obviously, be certain that you are sure that an item needs to be changed, and to what value.

[Csmith60]

And this continues to be a problem this year and the link you put goes to never never land. I will now have to do my taxes by hand even though I paid for TurboTax maybe be time to move on.

[Jam208]

Wow!! It's October 17th (got to file today) and this problem still persists. I spoke with an "expert" today who had no idea how to fix this. My query has been escalated, and I'm supposed to get a call back within 10 to 15 minutes. That was 30 minutes ago. Glad I found this question in the forum.

Looks like the only solution for today is to calculate the numbers manually in a new 1098 with the properly calculated numbers to force the right calculation.

[chrystian-roy]

Looks like the issue still exists in April 2023, and I get an Access Denied if I try to click the link about the bug.