Your question does not provide adequate details about the loans but this may be the issue.
First, adjust your total mortgage down to the $750,000.00. Also, adjust the interest down to the amount that would apply to $750,000.00 loan amount.
How much mortgage interest can you deduct in 2020? For the 2020 tax year, the mortgage interest deduction limit is $750,000, which means homeowners can deduct the interest paid on up to $750,000 in mortgage debt.
The IRS lets you deduct your mortgage interest, but only if you itemize deductions. You can't deduct the principal (the borrowed money you're paying back).
In addition to itemizing, these conditions must be met for mortgage interest to be deductible:
- The loan is secured, which means the lender has some kind of guarantee of payment, usually in the form of property. If a borrower defaults on payments, the lender can seize the property that’s securing the loan. If you’re buying or refinancing a home, especially if it’s your first home, the loan is usually secured by the home you’re buying or refinancing.
- The home with the secured loan must have sleeping, cooking, and toilet facilities.
- The debt can’t exceed $750,000 (or $1,000,000 if the loan was taken before December 16, 2017) in order to get the full deduction.
- You or someone on your tax return must have signed or co-signed the loan.
- If you rented out the home, you must have used the home more than 14 days during the tax year or 10% of the number of days you rented it out, whichever is greater.
Mortgage interest is usually reported on Form 1098, Mortgage Interest Statement. After you enter your 1098 in TurboTax, we'll ask a series of follow-up questions to make sure you're qualified to take the deduction.
For tax years 2018 through 2025, you can only deduct the interest from the amount of your loan that was used to buy, build, or improve the home that it’s secured by.
If you’ve ever used part of this loan to pay for things other than this home, you cannot deduct the interest from that amount of the loan, even if the transaction didn’t take place this year.
Don’t worry, we’ll help figure out what amount of interest you can deduct.
Examples of common ways you might have used this money not on your home include:
- Making a down payment on a different home
- Funding improvements on a different home
- Making a payment on a different loan or debt
- Having miscellaneous large purchases
Example: John took out a home equity line of credit on his home on Tuberose Street for $40,000. He used $25,000 to remodel his kitchen and bathrooms in his Tuberose Street home, and $15,000 as a down payment on a second house on Snowdrop Lane. He can only deduct the interest he paid on $25,000 he used to improve his Tuberose Street home.
You cannot claim a mortgage interest deduction unless you itemize your deductions. This requires you to use Form 1040 to file your taxes, and Schedule A to report your itemized expenses. The interest payments and points you pay are combined with all other deductions you claim on Schedule A; the total of which reduces your income that is subject to tax on the second page of your tax return.
I had the same issue, and apparently there is some sort of "bug" in the system impacting this. I was told yesterday a correction would be pushed today but the issue hasn't been corrected for me as of yet. I filled out this form (based on another thread I read) in hopes of getting updated when it gets fixed.
Some TurboTax customers are experiencing an issue with their Home Mortgage Average Balance. This can cause in the the Home Mortgage Interest to be incorrectly limited.
If you're experiencing the issue above, please go here to receive email notifications when any updates related to this issue become available.
**Mark the post that answers your question by clicking on "Mark as Best Answer"
If you choose to move forward with your return and 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).
If this is your situation then enter the mortgage debt for Form 1098 with the current lender, and then enter $1 or $0 for the second or former lender in that Form 1098. This will provide the correct amount of allowed mortgage interest deduction.
You may want to delete them first to begin again and also clearing your cache and cookies from your browser is a good ides (regularly).
Here's how to enter your mortgage interest statement in TurboTax: IRS Publication 936 provides details about the mortgage interest deduction.
- With your return open, search for 1098 and select the Jump to link in the search results.
- Follow the instructions to enter your 1098 info.
If you choose to wait, please continue to check your email for an update and make sure you did sign up for that here.