Deductible Home Mortgage Interest Worksheet 2020 - Error Avg Balance

[mminasian]

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?

[HoJo1982]

Should we tweet at them until they respond? It doesn't seem like they are taking this seriously. 

[nichojo6]

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.

[zxl124]

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.

[Rosebud99]

This is an area of tax law that used to be straight forward and has become more complicated by the latest tax reform act.  Limits on deductible mortgage loan balances, based on  effective dates of  loans etc have led to a “calculation formula” in TT that is just plain ugly and  overly simplified.  

In reality there are two main problems with this in TT right now as I see it.

Problem 1.   Pub 936 Part II section “Home Acquisition Debt page 10, clarifies as follows:

 "REFINANCED home acquisition debt.  Any secured debt you use to refinance home acquisition debt is treated as home acquisition debt.  However, the new debt will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before refinancing . . . Any additional debt not used to buy, build . . . isn’t home acquisition debt.”

My layman’s interpretation of this is that without a cash out refi, the entire new loan is also home aquistion debt, and even with a cash out that perhaps covers the points, some 99% of the new loan is also “home acquisition debt”.  I don’t see a way to account for this in TT as it stands.  

Problem 2, The IRS Pub 936 for 2019, (latest avail as of 1/29/21) in Section II. "Average Mortgage Balance"  states that the taxpayer  determines the “average balance of each mtg” and has latitude to use a variety of methods which they detail.  TT is not providing this information to their users, nor are they providing a means to enter an average balance the user determines following one of the IRS alternate methodologies.  This is where the TT U/I need to  1) clarify the options for determining the average balance, 2) let the user select a method or 3, let the user enter their  own calculated values for the avg balance.  

I am not a tax advisor - that’s why I use TT.  But I do have a background in software development and testing.  As it stands now the Home Mortgage Interest deduction in TT has been overly simplified by their tech team to create a formulaic answer, without considering the full set of specifications required to handle the complete range of the most recent tax rules in this area.  There does not appear to be a way to enter enough information in the U/I to get to accurate calculations for many situations, and then worse, no method for alerting the users of this limitation or a way for users to enter their correct directly bypassing the TT formula.  IMO the TT test team has not run this through enough real world scenarios to identify that this is currently not producing accurate deductions for a wide number of cases involving refinanced loans.

[LittleFatSheep]

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.

[Ron7996]

Still not fixed as of 1/30 - TURBOTAX Please FIX THIS

[Katie_B]

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. 

[EvergreenCOTaxPayer]

Finally some acknowledgement, thank you. 

[dhagen]

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.

[dhagen]

I have been working for two days with TT enrolled agent Bryan Swann and he has been unable to find a solution. This needs to go to programing NOW!

[mick]

Welcome to the club...... TT has acknowledged that there is an issue and is apparently working on a "fix".

Given that most financial institutions has not yet provided 1099-Int & 1099-DIV and OID's, this is not as pressing for me. It is frustrating never the less to find a bug for a common scenario -- refinancing in 2020 was not a rare occurrence. 

I was able to go into the combined "Ded Home Mort" worksheet and over-ride Line 12 to plug in the "average", which for me is original mortgage + new mortgage / 2.  To override, highlight the value in line 12 use Menu-->Edit-->Override. You should then be able to plug a value.

This could be a fix for simple refinances. (Note: these worksheets do not go to the IRS)

Disclaimer: I am not a tax professional, accountant, etc - use at your own risk 🙂

[dhagen]

In my case, this didn't fix the problem.

My original 2016 mortgage was under the $1 million cap for home mortgages.

My 2020 refinance of the original loan was for $765,000. That exceeds the $750,000 cap for mortgages after 2017. But this refinance's cap should inherit the 2016 cap of the original loan $1 million.

But thanks for the suggestion.

[StarmakerK]

How do I get direct access into the worksheets? I know the calculations I need but am not sure how to get the worksheets. 

[EvergreenCOTaxPayer]

In the top menu select View, then Forms. Now on the right hand side go to the form you want. Right click on any value you want to change and select Override, or Ctrl+D.