Form 1098 and confusing message "Beginning principal must be entered"

[lighter1]

I received this 1098 form from my bank for the Home Equity Line Of Credit:

End entered the data in the TurboTax form when it was asking about it:

Towards the end Turbotax asked me to make this correction

The validation error

Where do I get the value for the "Beginning balance"  taking into account it doesn't exist in 1098?

[Irene2805]

Enter the original amount of the Home Equity Line of Credit (HELOC) when you applied for the loan. You are correct that it does not appear on the 1098, but I'm sure you have that figure in your loan documents.

[lighter1]

Thank you for the response Irene, can you please double check it? I'm not sure that advice is correct because, from the definition of Loan Balance or Principal Balance that is basically "... the remaining amount you have left to pay on your loan ...". So, if I would do what you suggest I would specify there the amount available to me on that credit line which is not the amount I have left to pay on my loan.

[ThomasM125 · Accepted solution]

You are correct, you are dealing with what you actually owe, not the amount you can borrow. So, the beginning balance is what you owed to start out with and the ending balance is what you owe at end of year. 

[lighter1]

I must say I'm still confused because according to IRS the box #2 (Outstanding mortgage principal)  "... Shows the outstanding principal on the mortgage as of January 1, 2019. …" which I interpret in my own words as "Beginning balance as of January 1, 2019". I already entered the beginning balance (the content of the box #2) in TurboTax (see my 2nd screenshot from top in my first message) but now TurboTax wants me to enter it again? Also I'm not sure how TurboTax endedup specifying 0.00 in my Ending Balance if the form 1098 just doesn't have that field neither I was asked to enter it. 

I tried to enter 0 in the field (Beginning Balance) in the "Check This Entry" form but then later I got another validation error and it is not going away:

The cash was never taken our as part of a refinance so I cannot reply "Yes" there but TurboTax doesn't allow me to move further because of validation error there. Should I specify "No Entry" there? If so:

a)  What is the difference between "No Entry" and "No"?

b) Why TurtoTax is asking me about it if I already provided all the information from my 1098 form? If the TurboTax doesn't like answer "No" and it explicitly says "Cashout should be blank"  - why it asks me to select, I assume, "No Entry" instead of doing it automatically for me?

I'm pretty much stuck with this form. Is it a bug in TurboTax ? It just asks for the information and then displays validation errors which hardly make sense to me.

[ReginaM]

It looks like that there may have been an error in inputting your 1098 into TurboTax.  If you took no cash out when your refinanced your home, you should not get the second series of questions.  You may want to delete your 1098 and re-input it into TurboTax.

The second set of questions is to help you figure out what amount of interest you are eligible to take if you used part of your refinance funds for something other than your principal residence.  

If you did refinance your home and use the funds for something other than your residence, then you will need to answer the second section of questions.  On this screen, TurboTax is asking about your original loan amount as it will compute your tax deductible interest.

I hope this helps!

[cbeers]

What??? 

My loan kept getting sold. I have no idea what the beginning principal of my original loan was in 2021 or if I even paid bank 1 anything since everything is literally 0. They sent me a 1098 anyway, do I even have to enter it? Bank 2 sent me a 1098 because I actually paid them in 2021. Then, I refinanced my loan with bank 3.  Bank 3 has a beginning balance for escrow and an "ending principal balance," but none of them have a "beginning principal balance" on there. WHY do I need it??

[RaifH]

If Form 1098 from bank 1 is blank, you do not have to enter it. 

Your escrow balances are different and are not needed for filling out your tax return. The beginning principal balance for both your loans should be found in Box 2 of Form 1098. On that form, it is called Outstanding Mortgage Principal. 

The beginning principal is needed because the IRS has set limitations on the deductibility of mortgage interest. Depending on when you got your loan, the amount of it, and your filing status, you may not get to deduct the entire amount of interest paid in 2021. In situations with more than one Form 1098, TurboTax anticipates having the finalized home mortgage interest worksheet completed on February 17, 2022. 

@cbeers