Deductible Home Mortgage Interest Worksheet 2020 - Error Avg Balance

[Katie_B]

@HoJo1982 Thank you for checking in! There was an update sent out over the weekend that also includes some help in-program for entering mortgage interest.
We also have a new FAQ on the support site to address how to enter. If you are still needing additional assistance after the update, please refer to the following: How do I handle multiple 1098 mortgage forms? 

[Ron7996]

So there is now a footnote (multiple 1098s for a refinance in 2020):

(quote)

Multiple 1098s related to a Refinance done in 2020
1. Input just 1 1098 to cover the refinance.
2. Gather all of your 1098s related to the refinance.
3. Separately add up the amounts in Boxes 1, 5 and any property taxes paid
4. Box 1, Box 5 and Property Taxes- Input the total amounts for each on the refinanced debt
5. Box 2- Input the amount of debt on 01/01/2020.
6. Box 3- Mortgage origination date- Input the oldest date on your 1098s related to the refinance

(unquote)

There is also a footnote for loans above $750K funded after December 15, 2017:

(quote)

Taxpayers with loans above $750,000 funded After December 15, 2017
TurboTAx calculates the interest limit based on the inputted loan amounts and the mortgage origination date inputted on Box 3 of the 1098.

Loans originating after December 15th 2017 are limited to $750,000. Loans funded between October 13, 1987 to December 15, 2017 are limited to $1,000,000. (limits are half for those filing Married Filing Separately) This means the deductible interest is limited to what was paid on $750,000 or $1,000,000 depending on the origination date.

If you input a mortgage origination date after December 15, 2017 TurboTax will limit the interest paid based on a $750,000 loan limit.

You may be able to qualify under the $1,000,000 limit even if your existing loan funded after December 15, 2017 if you meet one of the following scenarios:

Scenario 1: Refinance of Acquisition Debt
You purchased the home before December 15, 2017 and have refinanced the debt. If you loan is above $750,000 please input the Mortgage Origination Date as the date you first purchased the home.

Scenario 2: Purchased the Home Right at the Cutoff Date of December 15, 2017

You meet ALL of the following criteria:
-Written binding contract to purchase the home dated before December 15, 2017 that intended to close before January 1, 2018
-Loan must be for a principal residence (not a vacation or second home)
-Home purchase must have been completed before April 1, 2018

If you meet the above criteria please make sure you input your loan origination date before December 15, 2017 to reflect you began the loan origination and your loan qualifies under the $1,000,000 limit.

(unquote)

These notes taken together apply to my particular situation and when I used the recommended method, it appeared to yield what I believe to be the correct result in my case.  This seems to be a "workaround" and it would be better if the software itself contained more explanatory steps, however at least it fixed the problem as far as what I can file.

[rose60]

Refinance: My work around for the average outstanding balance for mortgages error is to do the following: Replace box 2 of 1098 of original mortgage that is paid off during 2020 with the Amount of Principal Paid off in 2020 on that loan.. So for example a 420K mortgage balance at beginning of year becomes a 4K mortgage if that is amount of principal paid down on that loan for the part of year it was active. By doing this turbotax did not kick in the averages worksheet and limit deductibility of interest paid. It keeps all of the mortgage refinance values you enter intact for those to carry forward if necessary to tax year 2021. And since it was a simple refinance--the two values added up to the beginning of year 2020 loan outstanding balance. $4k +416K(refinance principal starting balance) =420K

[HoJo1982]

@Katie_B , I didn't receive an email update despite signing up and the link you are sending us to doesn't fix the ongoing miscalculation in TurboTax's software. 

[raider3416]

I am having the same issue

[TiffanyL]

@raider3416, please use the steps provided below and create a diagnostic file. We want to see if this is a program error or if you are not understanding the calculation correctly and assuming it's wrong:

1. Sign in to your tax return in TurboTax Online.

2. Go back into your return.

3. Find My Tax Tools in the left menu Select Tools.

4. In the Tools Center, select the Share my file with Agent link toward the bottom of the list.

5. You’ll see a message about creating a diagnostic copy of your tax file. Select OK.

6. After you click ok you’ll see that A protected copy of your return has been sent along with your 6 digit token number.

You can then provide your token number here so that we can look deeper into this issue for you.

[rprezeau]

I'm having this same problem.  I refinanced towards the end of the year and when i put in the two outstanding balances, it adds them up, instead of averaging them, which basically cuts my deduction in half.  This must be a simple fix.   Has anyone heard an ETA on a fix for this?  

[DMarkM1]

@rprezeau The workaround as noted above and contained in this link for desktop users with multiple 1098s related to a refinance in 2020 appears to work.  This should correctly apply or not apply the mortgage interest deduction limit due to mortgage loan amounts.  

[42Amy1]

I'm not an expert but I believe the "fix" is for a single property that was refinanced in 2020 and hence had two separate 1098s to enter for the same property.  So if you refinanced your original property and have two 1098s for it you add those Interest amounts together, but only put the original loan (prior to refi) balance.  The property you bought before you have sold your previous one for sale is separate and so would be a different 1098 interest, which is a much simpler issue.

[42Amy1]

@Mikemcna  I'm not an expert but I believe the "fix" is for a single property that was refinanced in 2020 and hence had two separate 1098s to enter for the same property.  So if you refinanced your original property and have two 1098s for it you add those Interest amounts together, but only put the original loan amount on the one 1098 (prior to refi) balance.  The property you bought before you have sold your previous one for sale is separate and so would be a different 1098 interest, which is a much simpler issue.

[Mikemcna]

It would be a much simpler fix if the total of the two mortgages was under the $750,000 limit, but the IRS describes two or three (I don’t have it in front of me) methods of determining the average balance for each mortgage and then totaling those figures, while TT simply adds the amounts on the 1098s.  The taxpayer using TT should be able to select which of the IRS methods he/she elects to use and then TT should do the math.  Having to know about and execute a work-around for either the replacement home issue or refi issue is really unacceptable IMO.  

[TerukoL]

Please click What do I do if I have multiple 1098s from refinancing my home debt? to help troubleshoot this issue. 

If you still continue to have the same problem, please click the link to contact TurboTax customer support.

[mick]

And I spent how much money for this software? 

[RPCO]

Spoke to TT Support about this problem 3X yesterday.

In my tax situation, I sold one home/paid-off a mortgage in August and purchased another home/took out a new mortgage in October of 2020. The new mortgage was sold to another mortgage servicer in December. Thus, I have three 1098s but at no time did I have more than one mortgage loan. However, TT's mortgage interest deduction worksheet computes an average mortgage balance as if I had three mortgage loans (1 on the sold home, 1 on the new home, and 1 for the new servicer) for the full year!!

This is obviously incorrect, pushes me way over the $750,000 limitation that applies to deductibility of mortgage interest, and cannot be edited at all. In fact, you cannot even see the TT deductibility worksheet unless you view a pro forma copy of your federal tax return. TT is incorrectly limiting my interest deduction, and there's nothing I can do about it. So frustrating...

I did my own research and found a draft of IRS Publication 936 "Home Mortgage Interest Deduction", issued Nov-2020. Pub. 936 allows three methods of computing the average mortgage principal balance. Using all these methods, I computed my 2020 average mortgage balance to be well under the $750K limit that TT is applying to my situation. TT doesn't even give you the option to choose which of the IRS-approved methods to use.

The last Support Agent I spoke with told me (finally) that TT knows about this error and has an active Tech Support case to resolve it. However, the fix isn't expected until March 11, which is the date by which the IRS has "promised" to release its final version of Publication 936 for 2020. So, it seems the issue is partly an IRS delay (no surprise there) and partly an Intuit/TT problem. At a minimum, TT should provide a warning that final guidance on home mortgage interest deducibility is pending...and users should be careful about filing too early because the interest deduction may be incorrectly limited by the average balance error! 

I am checking back on/about March 11 to see if the error is resolved, the average mortgage balance is correct at last, and I can take the full amount of my mortgage interest deduction. Users beware!!

[KevinH]

@dhagen Great question!  Lina is a credentialed tax expert and is employed by Intuit.  You can check out her info here