Deductible Home Mortgage Interest Worksheet 2020 - Error Avg Balance

[Monsterdaddy]

Given the low mortgage interest environment in 2020 I'm sure this will be a major issue for a lot of users.  Similar to the same 2019 error, if you had one or more refinances in 2020 the Deductible Home Mortgage Interest Worksheet will not calculate correctly and in most cases cause you to lose a significant portion of your Home Mortgage Interest deduction.

So TurboTax asks you for mortgage balances as of 1/1/2021 and if you paid it off it asks you for the amount paid off and the date.  By asking for the date I believe the intent was to calculate an average DAILY balance so it can determine the average ANNUAL balance to test against the 1,000,000 (or 750,000) threshold.  Unfortunately, the worksheet simply ADDS all the balances.  So if you had a $500K mortgage at the beginning of 2020 and refinanced it twice, the worksheet calculates your average balance as $1.5M which of course eliminates a huge portion of your deduction.  

TurboTax needs to fix this ASAP.  Someone seriously forgot to code the correct methodology.  Otherwise, what would be a workaround?  I went into Forms and I cannot alter anything.  Checking the "I paid off the mortgage" box doesn't seem to do anything at all (I think they were relying on the paid off date mechanism.)

[EvergreenCOTaxPayer]

I'm having the exact same issue. TT is not trying to calculate an average at all and only adding the totals. If you look at the worksheet details it says the loan I paid off still have a full 12 months even though I gave TT the payoff date. That is where the math doesn't work. This has a huge impact to mortgage deduction and has to be fixed.

[Monsterdaddy]

So I have a ghetto fix to the above problem.  When TurboTax asks for balances as of 1/1/2021 just enter zeroes for all of your mortgages.  This assumes you understand this part of the law and will work legitimately if you are under the thresholds.  I believe none of those worksheets will be filed with the tax return.

P.S.  Still hoping TurboTax fixes this.  I believe this bug has existed since the 2019 tax season.

[mick]

I just spent a couple hours dealing with exactly the same bug, only two mortgages - my old lender and my new lender

Refinanced a 1/12/2015 interest-only note for $975,000 on 10/22, for exactly the same terms, only lower rate. It's calculating my after balance as $1,950,000 

Please fix this

[Ron7996]

I am having the exact same problem - with the 2 mortgage statements entered, it is assuming the balances are additive and it is halving my interest deduction!   This needs to be fixed ASAP!!

[nichojo6]

I have the same problem with multiple 1098s and TT adding the loan values, but as of today, the home deduction worksheet is now completely kaput. The form doesn't even apply the wrong limit percentage to the wrong 'average' , it simply takes ALL the interest you paid from the 1098s and places it on the Schedule A - with no limits! This would be great if it was legal!!If you go into the Tax and Interest worksheet form, the entry for what limited interest should go to Schedule A is now a 'User Entry' field.  Maybe this simply means TT is working the problem. Hope they get this fixed before someone assumes TT is correct and gets slammed with an IRS bill.

[EvergreenCOTaxPayer]

As an update I have called and opened a ticket with TT hoping they can fix the issue before filing time in Feb. If not you have to manually do all the entries.

[HoJo1982]

Has anyone heard back with helpful guidance from TurboTax yet? I've flagged this issue twice to phone agents but they just seem confused. 

[mick]

I received a private message from one of their customer care reps asking for more information. Clearly they are working on it, but no ETA on a fix yet,

[Rosebud99]

Whew - thought it was me.  Same problem here - one house, 1st and 2nd mtgs, one for about 610k one for 80k. Refi'd both at end of Sept 2020.  TT calc'd the average balance between tier 2 and 3 loan types and gets 1.4 mil.  Never had a daily balance over 700k.  TT then erroneously reduced the Deduct Mtg interest by over 50%. Yikes. Turbo Tax are you listening?  Fix it or open up the worksheets that are locked behind the scenes to let me users put in the correct calculated amounts. Or, issue us refunds to we can go elsewhere.  Where is the "Alert" that this function is broken~!

[Rosebud99]

A couple of other tidbits - that are related and don't appear to be working right.  

Yes refi’s are not being handled right in determining  average loan balances hence the amount of deductible interest.  But the problem runs deeper when a loan is handed off to a new servicer/investor which generates additional 1098s which TT then appears to recognize as new another loans. I believe the  “loan acquisition date” is supposed to handle this, but I it appears  this calculation is also erroneous right now.  

Also the deductible points is far from clear on the TT u/i.  If a loan involved upfront points, and the loan was partially used for upgrades to the home the u/i has no place to split out the portion of the points for those upgrades.  One can do it in the Worksheets, but even there is is far from clear.  

[EvergreenCOTaxPayer]

Technically you can open them up and override any values TT inputs and do it manually. But then if I wanted to do that why would I pay for the software. And if I make a manual calculation incorrect it is on me.

[Rosebud99]

You are probably right, but I haven't found the source box among the worksheets where I can click, double click or right click to get one of the computed worksheet values to open.  

Admittedly I've been waiting for the 2020 IRS updates to be posted to their site to see if TT will in turn do an update that will correct the underlying problems.  I'm the meantime based on this thread, which I am so grateful to have discovered, I've been wasting my time.

And you are so right about why I would need TT.  

[cb641]

I just figured out that this must be a bug, and now I see from this forum that it should be a known bug, since it is not new. At least I won't waste anymore time trying to get TT to do the calculation correctly. Certainly reduces my trust in the software. My plan is to lie to TT and enter it all in one 1098, then keep a manual worksheet with the correct calculations with my records, just in case. That way, TT will give me the correct deduction. If you don't already know this, IRS Pub 936 describes the various ways to calculate this. The IRS never sees the worksheets, it just matches the deduction against the 1098(s) that it received.

[guy436bw3]

any news on when will this be corrected?