Refund went down after entering 1098 for a sold property

[JimLemur]

Hello!

Last year I sold and then bought a new property.  Both were used as my primary home.  I have two 1098s for my current/second property (mortgage was sold to another lender) and a third from the first property.  I put in the two 1098s from my current property and TurboTax was showing a nice refund.  When I put in the third 1098 from the property I sold, my refund went down significantly even though I paid a substantial amount of interest last year.

Also, when I look at the breakdown of my deductions, the amount shown for Interest Paid is less than the sum of the interest I paid according to my three 1098s.

What's going on here?

[AliciaP1 · Accepted solution]

Under tax law, you're limited on the amount of home interest you can deduct. The limit is based on the loan amount and date of the origination of debt.  Since your current home loan was sold, you have 2 mortgage balances on the 1098s between the 2 lenders.

To correct this so you aren't showing loan amounts over the limit you can follow these steps:

1. Gather all of your 1098 forms related to your loan that was sold (the form from your original lender and the form from your new lender).
2. Grab a calculator and add together the box 1 amount from each form. Enter the total in TurboTax as Box 1 Mortgage interest.
3. Add the Box 5 amount from each form and enter the total as Box 5 Mortgage insurance premiums. (If you weren’t required to pay mortgage insurance, these boxes will be blank on your forms and you won’t enter anything.)
4. Add the property tax paid from each form and enter it in the Property (real estate) taxes box.

Next, finish adding info for boxes 2, 3, 7, and 11 using Form 1098 for the original lender.

[JimLemur]

Thanks for the reply, Alicia.

Just so I understand this.  Are you saying I should consolidate the two 1098s from the current property and enter it into Turbo Tax as one form (for the original lender)?

This will leave me with two 1098s in Turbo Tax, one for the current property (with two 1098s consolidated into one) and then another 1098 for the property that was sold?

Thanks

[PattiF]

Yes, you should add the amounts on the 1098s from the current property, and then enter them into TurboTax. You will have two entries for 1098s in TurboTax.

[JimLemur]

Thank you both!  This seemed to fix it.