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.)
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.
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.
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
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!!
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.
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.
Has anyone heard back with helpful guidance from TurboTax yet? I've flagged this issue twice to phone agents but they just seem confused.
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,
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~!
A couple of other tidbits - that are related and don't appear to be working right.
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.
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.
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.
I am also having this error and it's driving me crazy. This is a massive error that could lead to people overpaying by 10's of thousands of dollars. Seems like something worth fixing, RIGHT TURBOTAX?
Should we tweet at them until they respond? It doesn't seem like they are taking this seriously.
Well, we could follow the Gamestop Reddit protest model, but they might not take that too well. 😉 I think TT should follow the Apple Support model and at least acknowledge the issue and assure us they're doing something. I'd like to think that they're trying to resolve the issue before they respond to us. But, the clock is ticking and we'd all like to get this straightened out.
Same here. We refinanced it once, and mortgage was sold to a different bank once, so I have 3 1098. Each ~$500K. If I followed the TT instruction on "filling in loan balance on the day you paid it off", I end up having average loan balance of $1.5M. Ridiculous. I opened the forms and looked at the "Deductible Home Mortgage Interest Worksheet" and boy it was wrong on so many levels. Looks like five-years-old coded that thing. For "Months loan outstanding", it simply ignores what you told TT the last day in made payment on the loan. Even though I told TT my last payment was in May 2020, it still says I had the loan for 12 months.... Then for my new loan, even though the "Months loan outstanding" was correctly filled, it does not take that into account when calculating "Average balance". If you only held the loan for 6 months, the average balance should be half the loan amount.
I remember similar problem with this last year. It seems even worse, and more difficult to fix this year. I used to use TaxAct which works great on this topic, switched to TurboTax because of a deal. So not worth it, one of the worst mistakes ever made.
We are having the similar issue.
Bought the home with loan before 2017 and the loan is above 1m. We have refinance usually everyone, and it worked well in previous years' filing with Turbotax.
This year, we had 36K internet, remaining loan balance 1.15M, had a refinance in 2019, so the mortgage origination date says Oct 2019.
We are supposed to be able to deduct 36K / 1.15M * 1M = 31.3K interest, but TT keeps saying we can only deduct 23.5K interest (which is 36K / 1.15M * 750K). We are clearly grandfathering the 1M interest cap, but there is no way to tell TT such info, and I think TT only uses the mortgage origination date to determine if I am qualified for 1M cap or 750K cap.
Another issue is that, we have a second home that we bought in 2020 with only ~5K interest, and when we add this 1098 form to TT, TT will completely mess up, and tells me I should use standard deduction. We ended up having to remove the second 1098, though it still does not resolve the first issue.
Hello, thank you for bringing this to our attention. This has been reported to us and is currently being investigated. I will let you know as I receive more information.
I have been struggling for two days with a TurboTax enrolled agent about this same problem.
In my case, the problem is in the behind-the-scenes interactions between these three worksheets (found under Forms within TT):
- Home Int Wkst (Central Loan... ) - my original 2016 mortgage, less than $1,000,000 (the cap until 2017).
- Home Int Wkst (LoanCare...) - my refinance loan of Nov 2020.
- Del Home Mort - This worksheet takes data from the above two worksheets.
The Del Home Mort worksheet ADDS the average balances of the two loans together, even though they were not concurrent. In my case, the sum of the two averages is over $1 million, so the program incorrectly reduces the total mortgage interest deduction that I am allowed.
The TT rep and I have tried numerous workarounds that have all failed. This is an absolute mess. I could have done my taxes faster by hand.