TurboTax Premier Not Deducting Mortgage Interest on Refinanced Mortgage

[DiddlyD]

So there's a limit on mortgage interest I assume even if you don't refinance and then your itemized deductions Sch A  total must exceed your standard deduction or Turbo tax takes the standard instead and your mortgage interest is not benefiting or reducing your taxes.  I thought this was of the big reasons to own a home and be able to use the mortgage interest to reduce your taxable income.  Well we know how the tax cuts for the wealthy were financed. 

[KrisD15]

Select YES and then enter the full amount if it is all allowable. 

@jan_s

[vbcadd]

This didn't work. It won't let me change the box.

[MaryM428]

 In order for your mortgage payments to be eligible for the interest deduction, the loan must be secured by your home, and the proceeds of the loan must have been used to buy, build or improve your main residence, plus one other home you own that you also use for personal purposes.

@vbcadd

[vbcadd]

This doesn't answer my question. Turbo Tax is combining mortgages when you refi and limiting the amount you can deduct. Of course the loan is secured by the property. That is not the issue here. There is a problem with the software and many more people are having this issue. If your loan is sold or you refi., it automatically adds us the loan amounts and if it is over $750,000 it limits your interest deduction. My loan is only 532,000 but the stupid software doesn't see that. So many others are having this issue too. They need to fix it!!!!!!! I refuse to pay thousands more in taxes then I am supposed to because of their mistake.  I'm not using Turbo Tax this year even though I paid for it already. I just bought H&R Block and will use it from now on if theirs doesn't have this issue. I've used Turbo Tax for over 20 years but this is unacceptable!!! 

[JohnB5677]

This may be a work around if you have multiple 1098s.  I suggest you enter each one separately.

If a Mortgage is paid off, or re-financed you should:

• Enter $1 in Box 2 Outstanding Mortgage principal for the Refinanced / Paid off mortgage
• Every 1098 should be posted.
• The final 1098 for that property will have the full loan amount as reflected in Box 2.

This will properly record every 1098, and avoid any issue with mortgage limitations.

[ursusamer]

My problem concerns the deduction of unamortized points for my previous mortgage and amortized points for my new mortgage obtained in 2020.  Turbotax comes up with an erroneous amount for the unamortized points on my old mortgage and thus deducts the wrong amount for 2020.  Then, it appears to deduct the entire amount of points I paid on the new mortgage, rather than amortizing over the life of the new mortgage. Turbotax does not ask how much of the old mortgage points I deducted in prior years, but apparently computes using a different method than I used.  Maybe I should just start with the right deduction amounts and work backwards to revise the 1098s, although I will need to use incorrect amounts for the old and new points to force the correct outcomes..

[MarilynG1]

@ursusamer If you refinanced with a new lender, you can deduct the unamortized points in full.

If with the same lender, add the unamortized points to the new points on the new mortgage.

Click this link for more info on Unamortized Points. 

[theresa4596]

Hi, it won't let me edit this on the form "does mortgage interest need to be limited ..."

[Renbuild1]

That did work!  Thanks a million.  I did roll some closing costs into the refinance.  Should I make Box 2 reflect the rolled in amount instead of just $0?

[MommyG5]

i had this happen to me except I didn’t question it until after I had already hit submit! I think I should amend my return but do you know how I can fix this on an amendment?

@Anonymous 

[DianeW777]

Yes, the answer is in your other post and posted here for your convenience.

First you want to start your amended return correctly.   Use the link below and select 2020 to amend last year's return, then carefully follow the instructions before you begin.

• How to amend a return that has already been filed.

Next, follow the steps below assuming the criteria matches your situation.  This should allow you to proceed to complete your amended return if the following statement is true. Add all of the Forms 1098 together to make one entry with the ending mortgage balance of the loan that was the final one in 2020.

• 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). 

NOTE: If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that isn't more than the cost of the home plus substantial improvements qualifies as home acquisition debt. This means that if  'cash out' proceeds were not used to improve the home they would not be part of home acquisition debt.

Any additional debt not used to buy, build, or substantially improve a qualified home isn't home acquisition debt. TurboTax will calculate the amount of allowed mortgage interest deduction based on your entry or you can choose to make the entries yourself.

• To review the information and worksheets you can use this link: IRS Publication 936 2020, page 12

Use the following link (and hyperlinks) for more information: Home Mortgage Interest Deduction; Deducting Home Mortgage Interest FAQs

@MommyG5

[sastry-sri]

I am in the same situation. Spoke to Turbo Tax expert ( so called experts).. no help.

I am using online version..  may be I have to buy a desktop version and reenter all info.

No more turbotax.

[Kimbyya]

I am having the same problem and I have the desktop version.  I've tried answering questions differently and it still only counts the interest that I paid on the mortgage that was later refinance.  I wonder how we report issues to Turbotax.

[RaifH]

If you refinanced this year, you should have received two Form 1098s, one from the bank prior to the refinance and one from the new mortgage holder. The best way to report this in TurboTax is to combine both onto one Form 1098:

1. In the Federal > Deductions & Credits section of your return, scroll down to Your Home and click Revisit/Start next to Mortgage Interest and Refinancing (Form 1098)
2. Edit your existing 1098. You should only have one that contains both loans.
3. Answer the questions and enter the information from your Form 1098s:
   1. Box 1 Mortgage interest - Add the amounts together on both 1098s
   2. Box 2 Outstanding Mortgage Principal - Use the amount reported on your old loan
   3. Box 3 Mortgage Origination Date - Use the original purchase date of the home
   4. Boxes 5 & 6 - Use the combined totals from both 1098s
   5. Make sure Box 7 is checked
4. Answer What kind of property is this loan secured by?
5. Answer Yes or No to  We didn't pay any points.
6. Answer Yes to Let's see if this is the most recent form for this loan.
7. Answer No to Is this the original loan used to buy your property? 
8. Answer Yes to Is this loan a HELOC or a refinance? 
9. Answer No to Did you take cash out? (assuming you did not take cash out when you refinanced)
10. Once you are back in the Home loan deduction summary screen, click Done.
11. Answer NO to Do either of these apply to this loan? Answer No even if it does apply, by using the mortgage origin date of the original purchase back in step 3, TurboTax will correctly apply the proper mortgage limit on your home acquisition debt. 
12. Enter the outstanding loan balance on January 1, 2022 in the first field. Leave the second field blank.

@Kimbyya @sastry-sri