Deductible Home Mortgage Interest Worksheet 2020 - Error Avg Balance

[HoJo1982]

@Cynthiad66, this issue has been flagged for over two months by us. Why does it take TurboTax so long to fix its coding? 

To the broader community who have flagged manual workarounds, I found it interesting that the IRS guidance in their Publication 936 is to find the average monthly balance (balance at the beginning of 2020 + balance at the end of 2020 and then divide by 2). This would actually save those of us with mortgages over $750k compared to if we just used the balance from January 2020. Thoughts? 

[mkadlece]

The main problem in the form with TT is that if you refinanced, it is adding up the two loans even if the first is paid off with the second. When the two loans total above the $1m value it excludes you from using interest as an itemized deduction. 

[mush]

Turbo tax does not calculate the deductible mortgage correctly. 

The way I corrected it was to go to view forms, find Schedule A, go to the line that shows mortgage interest and click on it.  then choose over ride and type in the correct amount.  I refinance during the year, but my mortgage balance was always under 750,000 but turbo tax does not recognize that.  Good luck

[Jill-13]

I tried deleting the loan balance amounts on the worksheets, and the deduction was correct BUT TURBOTAX WOULD NOT LET ME EFILE WITHOUT THE AMOUNTS!!  The update that came out today did not fix the problem.  When, oh WHEN, will Turbo Tax fix this???  It is infuriating!!

[GSD77]

I click on the Turbo Tax help (cannot replicate where and "What if I have multiple 1098s related to a refinance done in 2020"

Step 1 - Gather all 1098s

Step 2 Grab calculator and add up interest and enter in TT as Box 1 Mortgage Interest

Step 3 do same calculation for Box 5 Mortgage Insurance Premium

Step 4 do same calculation for for Property Taxes paid.

Step 5 Enter remaining items  from the 1098 for the loan that was paid off in 2020 for Outstanding Mortgage Principal (1/1/2020) for Loan paid off (Box 2,  Mortgage Origination Date (Box 3)  and the check box on box 7 (Address)

Dummy solution solution by TT doesn't  calculate an average.  In my case, the amount of is below the $750,000 and the Refinances are even less.  The Mortgage origination date is original loan date not the refinance date.  Regardless, TT should have fixed as this is a continuing problem (2019 posts on same).  When I search help for mortgage term a statement comes up that they know they have a problem and are working on it.

I guess earliest mortgage origination date my be right because it would allow for any 'grandfathering of amounts greater than 750,000 to extent permitted by irs code.  Doesn't affect me so I am not researching.    

[Jill-13]

Thanks for your assistance, BSD77.  I was trying to manipulate the numbers on FIVE 1098's I have to get TT to play nicely....but it didn't work.  Your solution worked perfectly.  In ten minutes, I was done and filed.  You are much appreciated!

[GSD77]

Glad it helped.

[zazapuppy]

Hi, GSD77, could you please explain this part again? I am so sorry i did not get it, i refinanced my home once and i had two 1098 forms in 2020 and i am confused so much by TT too

"Step 5 Enter remaining items  from the 1098 for the loan that was paid off in 2020 for Outstanding Mortgage Principal (1/1/2020) for Loan paid off (Box 2,  Mortgage Origination Date (Box 3)  and the check box on box 7 (Address)"

thanks so much,

[zazapuppy]

Hi, GSD77, 

Did you mean that i need to add two 1098 forms Mortgage interest together, putting outstanding balance principal as of the one as of 1/1/20.  What date should I put in as mortgage origination date? Should I put in my original loan date ( the year I purchased the house, which is 10/31/18)?  What about lender name? Should be same as the one as of 1/1/20 lender?thank you for your help.

[GSD77]

Box 1.  Add up all of mortgage intersest paid on mortgages.  So add up amounts on all 1098 forms.  

Box 2. Enter outstanding mortgage balance at beginning of year 1/1/2020 TT test to make sure not over $750,000 generally, if over $750,000 your interest deduction may be limited  If over $750,000 need to calculate an average balance outstanding use IRS instructions.

Box 3. Date of original mortgage ordination date on property, that is, date of first loan on property.  Has to due with $750,000 limitation or perhaps $1,000,000.  See instructions.

Box 10 on 1098 or yourReal Estates tax bill:  Add up all real estate taxes paid and enter in Property (real state) taxes paid box. On TT interest screen or enter through next TT window “Property Taxes”

so basically add up  both interest paid and real estate taxes paid and enter as one 1098 in TT.  I personally named the Mortgage Lender as a combined name (e.g. caitbank and Wells Fargo mortgages.

Post again if more questions.  If below $750,000 TT should accept and enter the combined interest and real estate taxes paid as full deductible and transfer to Schedule A

Enter amount of original loan balance as of 

[GSD77]

Yes, add up interest paid and enter combined total in Box 1.

Mortgage Principal Outstanding - Enter 1/1/2020 principal balance in Box 2.  If over $750,000 you need to calculate average mortgage balance, per irs instructions, to maximize interest deduction. 

Put the original 2018 loan date (10/31/2018) as mortgage origination date.

I put both lenders name in mortgage "Lender Name" box on TT's first screen.  Could be like "Citibank and Wells Fargo Banks  (Or if one bank maybe Citibank (2 loans) or account XXX123 and account XXX456)   

For real estate taxes, combine all taxes paid and enter into TT - third screen as Property (real estate) taxes paid.  Or enter on the specific screen for real estate taxes paid on TT deductions screen.

Post additional questions. 

Hope it helps 

[zazapuppy]

hi thanks for reply,

i did add up two mortgage amount and put 01/01/20 loan amount as mortgage principal balance but loan amount is over $750k, i didn’t calculate average mortgage balance though but at end TT only took around 81% of my total mortgage interest balance as deduction. i am wondering if it calculates it for us? i didn’t put in original purchase date though but i put in the original refinanced loan date which is 2019( so i guess it considered i got the home after that cut off 12/2017? i only put in 1st lender name though cuz i think IRS doesn’t see worksheet right? 

i did it this way n TT checked as no errors. not sure if i did it right this way...

[zazapuppy]

and after i put in all of those, it still asked me what is that loan balance as of 1/1/2021 or if i paid off the loan as of that date, and ask me if i do pay off the loan, what date did i pay off.   i put in my ending balance as of 12/31/2020 as 1/1/2021loan balance and i left 2nd box blank cuz the loan technically was not paid off ( cuz ending balance as of 12/31/20 was from the newest loan after refinance ), not sure if i did it correctly. but TT took it as no error 

[GSD77]

TT does calculate an average within it's system. I don't know exact parameters, but probably beginning principal balance plus ending principal balance divided by 2.  IRS publications have ways to calculate, but this simplest approach is probably close AS LONG AS YOU DIDN'T MAKE SIGNIFICANT EARLY REPAYMENT.  If just made normal payments probably OK.  Other methods to calculate take 12 month end principal balances (Jan - Dec), add up and divide by 12 OR take  cash interest paid on each loan and divide by interest rate on that loan to get an average principal amount outstanding, do for second loan and add two amounts together to get total principal amount outstanding.  I believe you have to override TT calculation on work sheet if you want to change average principal outstanding  to a lower amount to increase deductions.  Probably not a huge difference

Based upon your saying 81% of interest was deductible, was your  average loan balance around 926,000?

Date is important only if your  original purchase date on your property was before December 16, 2017 when there was a $1,000,000 loan balance limitation.  So wouldn't affect your calculation as original purchase was in 2018. 

Hopefully this helps, if average loan is about 926,000 in 2020 you are probably there.

Post  back with questions.

Name probably doesn't matter as I don't believe it shows on any filed form (check).  If shows up on actual filing I'd add both to the one line name. 

[GSD77]

Asking for 1/1/2021 balance to calculate an average loan balance.  Beginning principal plus Ending principal divided by 2 is average used by TT in there calculation of average loan balance.  As I said before, if just made regular scheduled payments or same amount per month this should be close to actual average principal amount.  

Beginning  = Loan at beginning of Year (1/1/2020 principal on Original Loan)

Ending = Loan at beginning of next year (1/1/2021 principal on Refinanced Loan)