Two 1098 for different loans & properties increase tax liability?

[Erhard123]

Hello,

I am entering two separate 1098s for two properties, two different lenders, no refinancing. The origination date of the first property is 2016, the second property 2021. As soon as I enter the interest rate of the second property ($1,992) the Federal Refund is reduced by about $2,500. 

As an experiment I entered $1 as paid interest and the refund was reduced by ~$1,300.

I understand that there is smaller deduction for mortgages that originated after 12/15/2017 or no deduction at all. However, I would expect the refund to stay at least the same and not become significantly less when I enter the second 1098.

It seems there is something triggering a reduction of the refund or more likely an increase in tax liability. What am I missing?

[MarilynG1]

You don't mention what the Mortgage Balances for your two 1098's are. There are Mortgage Interest limitations, as you mentioned. 

Did you indicate that both loans were to 'buy, build or improve your home?' 

Did you add other Income items after that may have caused your income increase? 

Since we can't see your return in this forum, and you are using TurboTax Online, I would suggest closing the program, clearing your Cache and Cookies and going back to this section again.  

You could also pay for your return, download a review PDF and review the calculations on the Mortgage Interest Worksheet. 

Please post again if you want more help.

Click this link for detailed info on Mortgage Interest.

[Erhard123]

Thank you, Marilyn. The mortgage balances are about $600,000 originating in 2013 and about $900,000 originating in 2021.

I did not enter any other income after completing the 1098. However, once I had entered all the information TurboTax asked me during the Review of the Deductions section to confirm the balances and the origination dates- which I had entered them as part of the 1098s.

After completing the review step the refund increased again, but it's still short about $800 when I don't enter the 2021 mortgage at all. That is the part I am trying to understand: It seems the possible deduction is now based on the share of each mortgage adding up to the limit? Whereas with only the one older mortgage 100% of the interest would be deductible, now it's only a portion because the newer mortgage falls under different rules.

[MarilynG1]

Yes, your Mortgage Interest may be limited.  On the PDF copy of your return, you can review the calculations on the Mortgage Interest Worksheet and amounts carried over to Schedule A.

Depending on how many months you carried the 900K mortgage (along with the 600K mortgage), your Average Mortgage Balance may be limiting your interest deduction.

Click this link for info on Why didn't my mortgage or property taxes increase my refund?