Tax Year Prior to 2020: 1098 Home Equity Line of Credit

[kiwiinpdx]

I have a small interest paid amount of $545 on my 1098 from Chase from a HELOC that we used in August.  However, Chase said Box 2 was left blank because we had no balance on Jan 1st 2019. Does that mean I cannot add that as a deduction as Turbo Tax will not let me use $0 in that box. 

[VictorW9]

Try leave it as blank. Also check the TurboTax resource on how to enter HELOC: Solved: Where do I enter home equity line of credit interest?

[kiwiinpdx]

Thanks, unfortunately it says I have to put something in that box.

Appreciate your response.

[VictorW9]

I guess you have confirmed the (HELOC) is deductible and the money was used to buy or improve the property that is secured by the loan.

[kiwiinpdx]

Yes, we started a house remodel.

Thanks

[Lennie]

I have the exact same problem.  Hope there is an answer.

[VictoriaD75]

For HELOC interest to be deductible, it must have been secured by the property and used to buy, build, or substantially improve the home. To enter the interest, follow these steps on TurboTax Online (this will vary slightly for desktop versions):

• Under the Federal menu, choose Deductions & Credits
• Expand the menu for Your Home
• Click Start/Revisit next to Mortgage Interest and Refinancing (Form 1098)
• Either Add another 1098 or click Edit next to the one in question
• Enter the lender information. Click Continue
• Answer the question Do any of these uncommon situations apply. Click Continue
• In testing this process, I was able to enter mortgage interest in box 1, $0 in box 2, and the date the money was borrowed in box 3, such as 08/01/2019. All other boxes were left blank. Click Continue
• Did you pay points in 2019 when you took out the loan? Answer and Continue.
• Is this loan secured by a property of yours? Note: If you answer No, the interest is not deductible.
• Is this loan a home equity line of credit or a loan you've ever refinanced? Answer Yes. Another question will pop up. Answer A home equity line of credit (HELOC)
• Have you used the money from this loan exclusively on this home? Answering Yes notifies the software that the funds were used to update the home.

After completing these steps, I had one error occur during the review. It asked how much money was borrowed during the year. Enter the total maximum that was borrowed from the HELOC in the box above the form. This should clear the error, claim the interest, and allow you to file.

[op58916]

In attempting these steps while attempting to add HELOC interest.  The program  does not allow you to put $0 in box #2.  A red error message is presented "Outstanding Mortgage Principle must have a value" 

[DaveF1006]

Please review this Turbo Tax link that addresses this issue.  According to the article:

If this is a new loan and the Lender left box 2 blank, enter the amount of the loan on the first day in 2019 when you acquired it.

The IRS has changed the 1098 this year and looks like it might change again for 2020.

For tax year 2019, Box 2 reports the loan balance as of 01-01-2019 HOWEVER if this is a new loan, enter the beginning balance of the loan. 

According to the IRS: 

"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."

[Ralley82]

It is asking me for the total we borrowed in 2021.  Do we have to enter that since it is a revolving line of credit that can be used for anything?

[AmyC]

If you have a line of credit that is not being used to buy, build, or improve the home, it is not deductible. No need to enter the information. See About Publication 936, Home Mortgage Interest Deduction.  If some part is being used for the house, then you would want to claim that portion. 

You can choose how you want to enter the deductible amount. You don't have to answer HELOC for the program and worksheet. You can call it a mortgage and just list the deductible portion. Only the totals go to the IRS. The IRS knows what is HELOC, what is mortgage, etc. You just want your sch A to list the allowable mortgage interest. How you get it there is your choice. The HELOC just helps to narrow down the allowed amount.

@Ralley82