Getting error: Schedule CA: _ your return has a mortgage interest adjustment which will require an update in order to ensure that the calculations are correct. Help ?

[sauspal143]

First time home buyer, not sure what is causing this issue, turbo tax keeps on asking me to check this entry but no help offered.

[KrisD15]

Are you using TurboTax Desktop? 

Did you select anything in the program about being a "First Time homebuyer?"

Did you get any kind of first time homebuyer assistance? 

[sauspal143]

Hey Kris,

I am using the online website. Where can we indicate in the TT software that I am a first time home buyer ?

[KrisD15]

Perhaps my wording was confusing.

Normally you would not indicate that you are a "first time homebuyer".

You mentioned it in your post, so I was fishing to see if you entered something in TurboTax by mistake which triggered something else.

(There was once an "First Time Homebuyer" Credit back in 2008 and some people are still paying that off) 

So you purchased a home, have one 1098 for the interest? 

Anything unusual? 

Are you filing Married Filing Jointly or Single? 

Is the loan balance 750,000 or less if Married Filing Jointly?

[sauspal143]

After wasting a good 18 hours figured out that the issue is:

1098 values if loan amount greater than 750,000 TT messes up the computation. In my case i was just over 750k, my loan amount is 760k. So I choose to ignore the 1098 values and instead computed the interest value if my load was 750k instead.

And who knew that small change made sense to TT :0 and I was blessed by the software to allow to file my taxes.

I lost 12$ in my returns but could not deal with any more lame reasons given by the support team.

Hope this helps someone in future.

[Hpthorn]

I am also getting this error using either iPad app or website.   Earlier I saw a link to sign up for notifications when an update would be available.   Is there one pending?  

Until this is fixed I am unable to eFile.  

[Hpthorn]

Clarification.   My mortgage is not over 750k.  It was a refinance where money was taken out.  That refinance happened in 2018.

[sauspal143]

From what I read in forum's combine all 1098 into a single one by doing the computations on your own. CA tax filing code in TT seems to have lots of bugs.

[AliciaP1]

The reason for the error is that your interest expense deduction is limited by the IRS when the outstanding balance of your mortgage exceeds $750,000 for mortgages taken on or after December 16, 2017.  The state of California allows the debt to reach $1,000,000 as long as you have $100,000 in equity before limiting the interest deduction.  

If you receive the error, you should be able to proceed through your state return and TurboTax Online automatically adjusts to include the additional interest deduction on your state return.

It is important to report your Form 1098 accurately on your tax return to ease the filing process with both the IRS and the state of California.

@sauspal143

[AliciaP1]

If your mortgage balance did not exceed $750,000 according to your most recent Form 1098, you may have an error due to entering multiple Form 1098s from your refinance.

You can correct the error by combining all of the Form 1098s directly related to the refinance and enter it as one Form 1098. Any 1098s not directly related to the refinance should get entered separately.

Follow these steps to enter your mortgage info:

1. Gather all of your 1098 forms related to your refinance (the form from your original lender and the form from your new lender).
2. Grab a calculator and add together the box 1 amount from each form. Enter the total in TurboTax as Box 1 Mortgage interest.
3. Add the Box 5 amount from each form and enter the total as Box 5 Mortgage insurance premiums. (If you weren’t required to pay mortgage insurance, these boxes will be blank on your forms and you won’t enter anything.)
4. Add the property tax paid from each form and enter it in the Property (real estate) taxes box.
5. Next, finish adding info for boxes 2, 3, 7, and 11 using Form 1098 for the original loan.

@Hpthorn

[sauspal143]

Unfortunately, even tough it was computing correctly by deducing Federal vs state values correctly, it was getting blocked at the smart check step and not allowing to proceed to file tax return with the error which I have reported. The only thing that helped was manually deduct (interest applicable for 750k) the extra interest value reported in 1098 (calculated for 760k) from box 1 and reducing loan amount to 750k. 

So basically 2 values were adjusted from box 1 and box 2.

box 1 - 12,380.05 became (12,380.05 - 78) 12,302.05.    78 is what TT computed and adjusted for CA state calculation as CA state the limit is 1M instead of 750K

box 2 - 760k became 750k

TT needs to fix this issue for CA state filing. As people are losing refund money because of this.

[Hpthorn]

For me I am getting this error with a single 1098 and a mortgage that is well under 750k.   

I am unable to proceed even if I zero out the mortgage adjustment amount.

the smart check keeps saying I need to download an update, even if I am using the web or iPad versions.   How do I report a bug?

[sauspal143]

Trust me I tried 16 hours to understand how to file a bug with TT. This is a very well known issue in the community. TT needs to look into this on priority. They charge a bomb on additional services but when it comes to provide a solution you will hear all sorts of explanations like federal limit 750k, CA state limit 1M, you need to ensure that the calculation are correct, the 1098 values needs to be adjusted, CA state is behind on the forms wait till Feb 10 when the forms will be updated, this is all we can do at this time and point you to bunch of forums which I am sure you would do the very first time you encounter an issue like this.

Try clearing out the form and start from scratch. If still it is not helping try using TaxAct or other softwares 🙂

[Hpthorn]

mortgage was refinanced in 2018 so only have the single 1098.

Revisited portion of Federal return related to mortgage.  Deleted California return and re-entered it.  Still getting same error below.   I get this error even if I put zero in for both interest and points adjustments.

“Schedule CA: _ your return has a mortgage interest adjustment which will require an update in order to ensure that the calculations are correct. To receive an update, select Check for Updates from the Online menu to connect to our website.”

[k6rbs]

Same problem with TT Deluxe.  I had to re-fi to buy my wife out following our divorce. I had 2 1098s. One was for a HELOC that was paid off and the other was for the REFI. Tried them separately, combined, manually entering the interest total, entering 0, entering the bigger of the two values - still fails. TT CAL form seems to have a bug that need fixing urgently.