TurboTax Makes Errors Calculating the CA Mortgage Interest Deduction

[jimretz1]

I've used TurboTax for many years. I'm currently in the process of filing amended returns for 2019, 2020, and 2021 because TurboTax did not properly calculate the California mortgage interest deduction. And TurboTax's instructions are poor. I've now spent many hours fixing errors.

Make sure that you look at the CA Adjustment Worksheet for your CA return. In my case, instead of adding the difference between the Federal deduction and the California deduction allowed (which results in a larger CA deduction, thus lowering the amount of tax owed), TurboTax subtracted the difference (exact opposite of what the software should have done). This caused me to pay more CA tax than I should have.

And TurboTax seems to have a hard time handling mortgages greater than $750k that were refinanced after 2017. I think I'm allowed to deduct up to $1 million of interest because my original purchase mortgage was prior to 2017, thus the refi is "grandfathered" in up to the $1M limit. 

[Anonymous_]

Contact Support.

What is the TurboTax phone number? (intuit.com)

[jimretz1]

Hello tagteam, thank you for responding to my post with Intuit's contact information.

What do you suggest I communicate to them? What should I expect them to do?

Thank you

[Anonymous_]

If you are experiencing issues with the program, they should be able to walk you through the process.

[NCperson]

@jimretz1 - the Turbo Tax warrentee covers the interest and penalties (but not the tax itself) if there was a bug in its program. 

if it turns out that the error was an input error, all bets are off; they don't cover that

[fanfare]

you will find many posts on the forum trying to figure out how TurboTax calculates Mortgage interest.

There are various scenarios it does not or did not handle correctly.

there's no point to contact support because they're not going to fix bugs in old versions.

@jimretz1 

[fanfare]

@NCperson 

 I remember you did the comparison across years.

Did you find that TurboTax 2021 could do it correctly?

[NCperson]

@fanfare -

I can't remember the specifics but there was a bug involved.  I would not have posted specifically about a CA bug. 

I did a compare across years related to mortgages passing over the $750,000 and $1,000,000 when there was cashout / HELOC involved; I did confirm a bug.... and could be this CA issue from OP is a 'knock on' effect of the first bug if the mortage exceeded $750,000.

[jimretz1]

Thanks @NCperson, it was not an input error.

[jimretz1]

@Anonymous_ thanks for posting the phone number. I called it, and got through to someone pretty quickly (about resolving a different issue).

[u0d4n7a0p]

Hi,

I am doing my 2023 taxes.  I found that I uploaded my mortgage interest 1098 and  answered turbo tax questions. The federal taxes due went down. But CA taxes remained same. This just means that turbo tax is not doing it right. Is this a known issue?

PS : I have paid all the taxes due before April 15th. I am yet to enter that in turbotax. Just in case.  I know that this is not related to what I am discussing above.

[jimretz1]

The mortgage interest deduction miscalculations are known by some users. Customer Service for TurboTax doesn't understand them.

My recommendation is to enter the data into TurboTax, but before you hit submit, do a manual audit of the tax forms that the software produces. If there are errors, you can correct the numbers on the actual forms. 

This issue is frustrating. If I hadn't caught the errors (and amended years of returns), I would have overpaid many thousands of dollars.

Good luck 

[u0d4n7a0p]

Hi,

Is this bug specific to the case where mortgage is above 1 million? My mortgage is below 750K

[jimretz1]

The bug may have only occurred with mortgages above $1 million because California's allowable limit is different from Federal limits. However I don't completely trust TurboTax anymore. Now I review the actual tax forms that are submitted to the IRS and California's FTB.

[davy_xyly]

Maybe a different bug but also happens to mortgage from 750k to 1M:

In CA state tax schedule E it will use the deducted amount of mortgage interest in Federal, but not the full amount. I just found it out this year. Never ever trust this product.