Two 1098s from selling/buying House in 2021

[bpaulg]

We bought and sold our primary residence homes in 2021.  So we bought our primary residence and then the next month sold our previous primary residence. 

So I have two 1098s.  Both homes were my primary residences but just at different times.  So I am assuming I mark them both as Primary right?  

And for the house that was sold, do I need to add the outstanding principal amount that shows on the 1098 for the house I sold?

I read this user's post from last year (pasted below), but I am still not clear if I need to enter 0 for the house we sold.  Is that required for this year? Its not listed in documentation anywhere.  Thanks!

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/two-1098s-with-different-lenders...

[JillS56]

When buying and selling a home in the same year, you enter both 1098 forms.  But you should enter zero in Box 2 for the Outstanding Mortgage Principal of the home loan that is no longer in existence (sold) by the end of the year on the screen titled Let's get the details from your Home loan 1098.

You will also want to select that the loan is no longer there at the end of the year is marked as paid off during the year.  You will want to answer the question Was this loan paid off or refinanced with a different lender in 2021?  NO.

You will enter your second loan exactly as it is reported on your Form 1098.

Deducting Home Mortgage Interest

[bpaulg]

Jill, thanks for that info. I had seen someone else say that.  The problem is I enter $0 in Box 2 of the Home Loan that is no longer in existence (sold).  But there is no where I can see to select  that the loan is no longer there at the end of the yea/ is marked as paid off during the year.  I dont see that anywhere walking through the 1098 questions.   I also do not see the the question Was this loan paid off or refinanced with a different lender in 2021?  anywhere at all.  Where am I supposed to see this??

[AmyC]

Box 2 should be the amount from Jan 1, 2021 not Dec 31. Once you correct box 2, it will calculate correctly. The program thinks you had no balance during the year.

[bpaulg]

Thanks Amy.  Im a bit confused.  

Let me summarize.  I bought a house on 1/15/21.  Sold our other house around 3/5/21.

So for the 1098 from my first home sold on 3/5/21,  I dont have any amount from 1/1/21 or 12/31/21.  I dont even know how Id know the difference between the two you are saying.  I just put the amount in Box 2 from the 1098 on my first home. Im guessing thats the amount right before I sold it?

So the 1098 for my new house bought on 1/15/21, I just enter it in normally. 

It seems to work fine if I enter them both in with the amounts in box 2 on each.  It does ask me a funny question about is this my Primary House?  I answer yes on both because they both were.  

When I enter Zero as Jill said, it doesnt prompt me for any of the other questions she said would come.  And I dont know what you mean about the different balances between 1/1/21 and 12/31(20 or 21?)  

[RaifH]

TurboTax generally only asks follow-up questions if your Outstanding Mortgage Principal in box 2 of Form 1098 exceeds $750,000 in order to try to maximize the deduction. If your amounts do not add up to that, your entire mortgage interest is deductible anyway so it does not need any clarifying information. Otherwise, your interest deduction may be limited.

If the Outstanding Mortgage Principal on your two 1098s does not add up to $750,000, report them just as they are. Mark them both as your primary home and that the first one was paid off. 

If it exceeds that amount, you can enter $0 as @JillS56 outlined above for the sold home. It sounds like this brings the amount below $750,000 for Outstanding Mortgage Principal which is why you are not being asked any follow-up questions. This is also fine. 

The finalized worksheet to properly calculate the Mortgage Interest deduction should be released on February 17, 2022. If your Outstanding Mortgage Principals exceed $750,000 you can wait until then and report the Forms exactly as they appear. The system will then ask you follow-up questions about each loan after you enter both. In the Tell us a little more about your loan you will enter the final principal balance and the payoff date of the home you sold in March. For the mortgage on the new home, you will enter the loan balance as of January 1, 2022, which should be slightly lower than the Outstanding Mortgage Principal reported on Form 1098 since you will have made a year's worth of mortgage payments. TurboTax will then correctly calculate the mortgage interest deduction based on the average balance of both loans.

[bpaulg]

Great thanks. I think I understand now.  For this statement:

" For the mortgage on the new home, you will enter the loan balance as of January 1, 2022, which should be slightly lower than the Outstanding Mortgage Principal reported on Form 1098 since you will have made a year's worth of mortgage payments. "

Why is that?  The outstanding principal on my new home's 1098 is indeed the initial amount I mortgaged. Why does the bank put that amount on the 1098?  And not the most recent amount of outstanding balance?

[DMarkM1]

Yes.  For a Tax Year 2021 mortgage form 1098 the amount in Box 2 is the loan balance on 1 January 2021 or if the loan began in 2021, the beginning loan balance.  This indicates the loan balance(s) that you paid interest on in 2021 which is what you are getting a deduction for on your 2021 return. 

Here are the 2021 Instructions for the Mortgage form 1098; see page 6 for a box 2 description.  

An ending balance would not indicate what balance you paid interest on in 2021.     

[bpaulg]

Ok, makes sense.  So your saying I shouldnt go the direction of the previous user's advice:  " For the mortgage on the new home, you will enter the loan balance as of January 1, 2022, which should be slightly lower than the Outstanding Mortgage Principal reported on Form 1098"

But that I should just enter the beginning loan balance, which is what is showing on my 1098.

[DianeW777]

Yes, you are correct. You should enter the loan balance as indicated on your Form 1098. The IRS is asking for the loan balance on January 1st, 2021, which is what is reported on your form.  

[Evans924]

We sold our condo in September of 2021, and bought our new home October of 2021. the outstanding principle does not exceed $750,000. I marked both at primary residence, how would i indicate which one was sold? 

[DMarkM1 · Accepted solution]

As long as your total principle does not exceed $750,000 and the mortgages are secured by your homes and used to buy, build or improve those homes all of your interest paid would be deductible.  You would not be asked about more information because you were not limited.

If the total had exceeded $750,000 you would have been asked additional questions to determine the interest limitation.  Those questions would have included loan pay-offs and dates.  

[tombones]

Thanks for this information. My situation is very similar to the original poster's. Any update on the status of the finalized worksheet? It's almost a week past February 17th and this issue is still preventing me from filing.

[TeresaM]

Thank you for sharing this information. Our team is working to resolve an error message for the form availability of the Deductible Mortgage Interest Worksheet after the original date expected.

Please see this TurboTax Help article which has a link to sign up for updates. Notifications Mortgage Interest Worksheet

[tombones]

I subscribed to the link you provided, but after several weeks of "we're still working on it" updates, it suddenly went silent, and now that page appears to have been removed. What gives? Has the issue been resolved? This is infuriating.