Refinanced / transferred mortgage showing as 4x the mortgage debt I actually have! How do I fix this?

[CCap]

My existing mortgage was transferred to a new lender, then I refinanced, then the new mortgage was immediately transferred.  I received four 1098 forms and entered in the information.  Now my California home mortgage interest worksheet is listing my debt as being four times the amount it actually is!  How do I resolve this?

[BarbaraW22]

If you received multiple Form 1098s, please review your entries in TurboTax to make sure you have answered all the questions correctly and entered the correct balance of your loan. TurboTax uses this information to calculate your mortgage interest deduction.

To review your Form 1098 entries:

1. Log into TurboTax and click on any topic to continue
2. Click on Federal from the menu on the left-hand side 
3. Click on Deductions & Credits at the top and then click Edit/Add next to Mortgage Interest and Refinancing (Form 1098)
4. Click on Review next to each 1098 entry and verify your entries
5. Pay close attention to the following:

• Outstanding mortgage principal as of 1/1/2019 (If you took out the loan after January 1, 2019, then leave this field blank)
• Mortgage origination date
• Mortgage acquisition date (if applicable)
• If your loan was refinanced, mark "Yes" to the question "Is this loan a home equity line of credit or a loan you've ever refinanced?" and answer the questions carefully

Note: 

• If your loan was refinanced, it is best to enter the 1098 from your original loan before the 1098 from your refinance.
• If your loan was bought by another company with the same interest rate and principal amount, this doesn't count as refinancing your loan.

For additional information, please see this TurboTax article

[bdimashkie]

I'm having a similar issue as the original post.  Refinanced my home in 2019 and I had two 1098.  Inputed forms perfectly and answered questions correctly.  I followed the recommended solution posted here.  California Mortgage info is showing 2x mortgage value and Federal is assuming limited mortgage interest due to mortgage values in excess of the fed limit and I am getting an error in the Smart Check requiring me to input an interest limit. 

I think this is a bug in the software that isn't recognizing the inputs as a refi.

[Anonymous]

I am having a similar issue.  (Mine is 5x higher!). The original loan was taken to purchase the property in 2018.  I entered that statement first.  Box 2 for Outstanding Mortgage Principal is blank on that 1098, so I left that amount blank in TT too.

Some of the other 1098 forms had a value in Box 2 and some didn't.  For those that listed a value there, the amount is a bit different from each other.  I entered each into TT just as shown on each 1098, including the amount in Box 2 if it showed one.

Is my problem because some or all of my 1098 forms are incorrect?  Should I simply ignore what is in Box 2 on the 1098 and show what should be there per your advice? (Enter the outstanding balance for the first loan for what it was 1/1/2019 and for subsequent loans leave that value blank?) 

[chanelhurley]

I'm having this issue as well. I refinanced my mortgage with the same lender in 2019, entered both 1098's and triple checked to make sure all info is correct, including refinance. Federal is requiring an answer to limitation, (because it thinks my value is higher) and California state shows my home acquisition value as double. I can't find a way to fix this and will be unable to file until Turbo Tax addresses the issue. 

[DianeC958]

For the refinanced loans the amount in Box 2 needs to be $0.  Since the loan were not started until 2019 at the beginning of 2019 there is not a balance for the loan.

Please review your 1098 forms and change the amount in box 2 for the refinanced loans.

[CCap]

But box 2 is supposed to be balance on date of origination (if not 1/1/19).  I do not want to input something inconsistent with what is supposed to be in box 2

[KrisD15]

Box 2 is the balance on 01-01-2019 OR, if the loan was new in 2019, on the first day of the origination. 

You do not need to enter a zero or leave it blank.

If you need to edit the 1098 section, I suggest you delete any 1098 forms you may have entered ,and enter the 1098's over fresh.  Some screens only appear when the 1098 is first entered. 

Enter the oldest 1098 first and follow the interview questions carefully. 

If the loan was moved to a different lender in 2019 and you have two 1098's to enter:

First, delete both 1098's if you started entering them. Do NOT try to edit them.

Enter the older loan first, enter box 2 as it is reported, 

THERE WILL BE A SCREEN ASKING "WAS THIS LOAN PAID OFF OR SOLD IN 2019?"  CLICK "YES" 

(this screen will not appear if you go back and edit)

Continue through the interview

Next, enter the second 1098

If box 2 is blank, enter zero, otherwise enter what is in box 2. DO NOT LEAVE IT BLANK

Continue through the interview questions. Do not select that it is a HELC. 

Since you clicked that the first 1098 was paid off or refinanced with a different lender, the mortgage balances (box 2) will not be added together. 

[chanelhurley]

Even after following all of these steps, (which I already did the first time around anyway) It's still doubling my values. I even manually entered the paid off date on my first loan in "forms" mode. No luck. This is clearly a widespread issue, and I'm hoping there will be an update soon to fix it. 

[Anonymous]

Same thing happened to me, at least initially.  I followed all the steps, but the amount didn't change, however, I went out of TT and went back in and the issue got fixed!  I can't think of anything else I did to trigger that. Maybe that will work for you.

[CCap]

310, when you exited TurboTax and went back in, did you re-enter the info or was it just magically fixed when you went back in?  

when I input my 1098s, TT never inquires as to whether the loan was paid off or sold during 2019.  I wish it did.  Does it matter which version I am using?  I am using Premier.

[Anonymous]

It was just magic.  I am using Premier.  

[CCap]

Question: what value did you put for box 2 on 1098 for the newer (refinanced) loan?  Tax rules seem to say to put the amount at origination (which is what is in my box 2), but TT online seems to say to put 0 since there was no balance on Jan 1 2019.  Desktop TT won’t let me enter 0 anyway, though.

[Anonymous]

Except for the original loan from 2018, I put zero in Box 2, and while that what was advised originally in this post, not sure that matches what shows in the tax instructions from the IRS.  Except for the original loan I took in 2018, the other 4 1098's were for refinances and transfers, which seem to me to match the second two scenarios listed in the instructions respectively.

Box 2. Outstanding Mortgage Principal
Enter the amount of outstanding principal on the mortgage as of January 1, 2019. If you originated the mortgage in 2019, enter the mortgage principal as of the date of origination. If you acquired the mortgage in 2019, enter the outstanding mortgage principal as of the date of acquisition.

[DMarkM1]

If you have an amount in box 2 of your form 1098 put it in as that is correct per IRS instruction as you mention.  Once you get done entering all forms 1098 and click "Done" you will get to a questions asking if you exceed the mortgage limits. 

"Do any of these situations apply to you?"

• Mortgages that were taken out on or before December 15, 2017 and they total more than $1 million ($500,000 if Married Filing Separately).
• Mortgages that were taken out after December 15, 2017 and they total more than $750,000 ($375,000 if Married Filing Separately).

If you answer "No" inspite of what the worksheet calculations are, the interest deduction will not be limited.  If you answer "Yes",  then you will need to manually calculate the mortgage interest deduction using table 1 on page 12 in publication 936 and enter the amount in the box provided.  The worksheets in either case are not filed; they are for calculations and records only.