Deductible Home Mortgage Interest Worksheet 2020 - Error Avg Balance

[dhagen]

The IRS has just posted a draft version of Publication 936, Home Mortgage Interest Deduction for tax year 2020.

The publication is dated Nov 23, 2020.

On page 10 it states:

"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. ..."

In my case the closing principal on my original 2016 mortgage was $920,188 (as of 11/20/20). My refinanced mortgage was for less, $765,000. 

The limit on mortgage interest deduction for loans between1987-2017 was $1,000,000. After 2017, the limit was changed to $750,000. I believe that the $1,000,000 limit still applies to my 2020 loan because it was a refinance of the original loan. Thus all of the interest from both loans should be deductible.

[Rosebud99]

The direct entry tip doesn't work with MacOS.  The cells in the DED HOME MORT worksheet  are locked.  

BTW, if you calculate the average loan balance outside of TT and are under all the limits, you can enter a penny in each EOP loan balance cell in the U/I and it then lets one tabulate the interest paid without reduction. (TT doesn't accept a zero value)     -   In my cause that works  until TT has this fixed or I am ready to file.  I don't need a complicated calc engine behind the scenes in my case, but by entering any loan values, those amounts end up getting doubled, throwing the average off and limiting my interest deduction.  

[AmyC]

Technical is working on it. please go here to receive email notifications when any updates related to this issue become available.

New: retroactive for 2018 and 2019 also, MIP is deductible again. Mortgage Insurance Premiums, see Changes to the Deductibility of Mortgage Insurance Premiums (MIP) | Internal Revenue Service (irs.go...

[mshoak]

We definitely need a way to enter our average mortgage balance amount. TurboTax seems to be computing a balance based on the amount in the 1098, but even when it does that, the program does not input the reduced amount into the 1040. On my Mac, it won’t even let me manually change the data in the underlying worksheet. I hope this gets fixed quickly.

[JamesG1]

Some TurboTax customers are experiencing an issue with their home mortgage average balance. This can cause  the home mortgage interest to be incorrectly limited.  This may be affecting your tax return.

Please sign up for email notifications when an update related to this issue is available here.

See also this TurboTax Help.

[4Blakes]

@HoJo1982 great idea! I just tweeted at them.

[andil329]

How do you access the worksheets?  I'm having the same issue - refi in May on an initial mortgage originated in Dec of 2018....Entered in both, my refund swung one way. The program pulled up the worksheet and asked for a field entry which I accidentally hit enter on and it swung deeply in the other direction.  It's not saying that I have $0 in mortgage interest which is FAR from the truth.  Anyone have any thoughts/suggestions??

[Sigohigo]

I did the same thing you did and was still shorted on my interest deduction after entering zeroes on the balance on 12/31/2020.  Same scenario of owning two properties with one being refinanced and having two 1098s for one property.  I think part of the problem is my refinance loan went into effect 5 days before my old loan was paid off.  Regardless, I never actually owed for more than one property between the two 1098s.  TT does just calculate the totals of all the mortgage balances which pushed me well over the $1 million mark short changing my total interest deduction. I concur TT needs to fix this.

[RayW7]

If the loan was refinanced or moved to a different lender in 2020 and you have two 1098's to enter:

First, delete both 1098's if you  started to enter them. Do NOT try to edit them.

Enter the older loan first, enter box 2 as it is reported, 

THERE WILL BE A SCREEN ASKING "WAS THIS LOAN PAID OFF OR SOLD IN 2020?"  CLICK "YES" 

(this screen will not appear if you go back and edit)

Continue through the interview

Next, enter the second 1098

If box 2 is blank, enter zero, otherwise enter what is in box 2. DO NOT LEAVE IT BLANK

Continue through the interview questions. Do not select that it is a HELC. 

Since you clicked that the first 1098 was paid off or refinanced with a different lender, the mortgage balances (box 2) will not be added together. 

[Rosebud99]

I appreciate the effort - but this doesn’t fix my situation.   With a combination of a 1st TD, a second TD, both being refied and combined then sold to new investor/lender servicer, a single property can have 5 1098’s for the year.  Real life example here.

While I would love to think there is a way that a user could enter their loan balances, dates issued, dates assumed  into TT, as well as being sure to check all the right boxes and then let TT calculate the answer - it just isn’t so.  Even following a methodological way of entering the 1098s in “date order” doesn’t help and kind of ignores the fact that the TT engine ought to be using  in the user entered data values to perform it’s calculations.  

Right now TT can’t even figure out that a date in mid August should be calculated as 7.5 months - instead of 9 (in my case) for some reason.  TT is really a hot mess right now.

[JamesG1]

Some TurboTax customers are experiencing an issue with their home mortgage average balance. This can cause the home mortgage interest to be incorrectly limited.  This may be affecting your tax return.

Please sign up for email notifications when an update related to this issue is available here.

See also this TurboTax Help.

[dhagen]

I found the answer!!!!!

First I applied the updates that came out today.

Then, in Easy Step, I deleted both of my 1098’s and started over with no mortgage interest deduction.

When I was filing out the details in Easy Step for the first 1098 form, I noticed that at the bottom of the screen there was a link “Multiple 1098’s related to a Refinace done in 2020” in blue. I think this is new. 

The Help window tells me to enter only ONE, COMBINED 1098 if I have refinanced in 2020.

I added together the amounts in Box 1 from both of my 1098 forms, as instructed, which gave me a total of all my 2020 mortgage interest from both loans for Box 1.

For Box 3, Origination date, it instructed me to put in the oldest date on my two 1098 forms.

Later on, another screen appears asking about loans taken out after 1987 and after 2017. 

There is another “What if I refinanced?” link in blue at the bottom of the screen.

According to this info, the loan limitation for the refinanced loan is based on the date of the original loan, not the date of the refinance loan. In my case this made a big difference because the loan limit for my original 2016 loan was $1,000,000, but for loans taken out after 2017, the loan limit is $750,000. My refinance loan is above this limit, but well below my original limit.

The only problem I encountered was trying to include the points I paid on the 2020 refinance loan via EasyStep.

I tried entering the points ($25,711- ouch), amortized over the 30 year life of the new loan, but no matter what I did, it would cut my mortgage interest deduction by tens of thousands of dollars.

So instead, I manually added the $138 in amortized points for the refinance loan directly on the Schedule A.

In summary, I now have only one “Home Int Wkst” that combines my two 1098s. I no longer have a "Ded Home Int” worksheet, which was creating all the problems. 

In my mind, this is clearly a workaround that TurboTax has created. Nonetheless, my return passes the error checks and is correct dollar-wise.

I’m just relieved that I can submit my Fed and State returns electronically through TT this year and don't have to start over with another software package.

[Rosebud99]

Fantastic news - that does indeed sound promising! Thanks for the news about todays update too. 

[zxl124]

Thanks for the tip. Will try it. However, we could have done this ourselves if we are entering numbers different from what we received on 1098. TT is supposed to do these jobs for us, so we only need to enter what we receive. Still very disappointing. 

[dhagen]

I agree! 
And what TT is asking us to do now would not be that difficult to program!