"Home Mortgage Interest Worksheet" errors

Forum|Forum|6 years ago
February 11, 2020
2 replies
30 views

I am working (around) your bug regarding multiple 1098 forms. I am consolodating the two forms I have and that seems _close_ to working except: the form is accepting information about how the cash out was arrived at (the sub worksheet with itemization of the expenses related to house accq. etc. so the remainder can be identified.

BUT the "Home Mortgage Interest Worksheet" wants to call the out standing principal at 12/31/2019 the "Beginning Balance" in F3. Which makes no sense. I cannot tell where that number then comes into play but it is wrong and that can lead to no good outcome.

DianeC958

Level 12

When you have multiple 1098 forms the information for Box 2 should be $0 for any mortgage that was refinanced during the year or sold to another mortgage company.

Box 2 is asking for the balance due on the mortgage as of 01/01/2019 which for the refinanced mortgage and a sold mortgage would be $0.

By putting $0 into box 2 for refinanced and sold mortgages the limitations will not be imposed unless your loan is over $1 million.

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jake93

Level 4

That is not correct information regarding Box 2. Box 2 is for the balance as of 1/1/19 or the acquisition date when the loan is acquired during 2019 but after 1/1/2019. This is from the 1098 instructions from the IRS.

jake93

Level 4

This is definitely an issue (see thread 2019 Limit Deductible Mortgage Interest Question Not Working). I have the desktop TT program. I have 3 1098s. One is the original loan, one is a refinance and the 3rd is a transfer. I sent my tax file to TT as requested regarding this issue. They have not responded.

There have been 2 work arounds suggested by TT users.

The first is to go into the actual form and check the “No” box.

The second is to answer the tax limitation question “No”, do not click continue, save the return, back out of the program, reopen the program and manually continue your return at the next step.

I have actually tried both solutions and both cleared all the error checks and were deemed ready to efile. I have successfully efiled using the second work around. My return has been accepted and approved by the IRS and state.
TT definitely needs to fix this problem. I don’t pay for tax software to have it calculate my taxes incorrectly. In my case, the error causes a taxes due amount of over $2500 vs a refund of over $500. Its unacceptable. It is doubly irritating to have TT repeated say “there is no bug”. I guess People can’t rely on TT to “Get your maximum refund, guaranteed”.

Tustin

Level 2

Folks,

Just an FYI this problem persists for the 2020 returns. I am using the desktop application and it has been a real nightmare, I could of studied taxes and completed the forms long-hand in the time it has taken me to talk with TT do research etc. In my situation, I sold a home late last year and purchased another, and even my new loan sold the mortgage in the first month, so I have a total of five (5) W2s. I have entered zero into the mortgages that have been paid off, but in my situation my total loan amount exceeds 750K (by a little) and as soon as the 750K is exceeded it disallows all the mortgage interest deduction and gives me only the standard deduction. I have been told several things but none of them seem to make sense or accurately solve the problem.

Any help is appreciated.

Cynthiad66

Level 14

First, adjust your total mortgage down to the $750,000.00. Also, adjust the interest down to the amount that would apply to $750,000.00 loan amount.

How much mortgage interest can you deduct in 2020? For the 2020 tax year, the mortgage interest deduction limit is $750,000, which means homeowners can deduct the interest paid on up to $750,000 in mortgage debt.

The IRS lets you deduct your mortgage interest, but only if you itemize deductions. You can't deduct the principal (the borrowed money you're paying back).

In addition to itemizing, these conditions must be met for mortgage interest to be deductible:

The loan is secured, which means the lender has some kind of guarantee of payment, usually in the form of property. If a borrower defaults on payments, the lender can seize the property that’s securing the loan. If you’re buying or refinancing a home, especially if it’s your first home, the loan is usually secured by the home you’re buying or refinancing.
The home with the secured loan must have sleeping, cooking, and toilet facilities.
The debt can’t exceed $750,000 (or $1,000,000 if the loan was taken before December 16, 2017) in order to get the full deduction.
You or someone on your tax return must have signed or co-signed the loan.
If you rented out the home, you must have used the home more than 14 days during the tax year or 10% of the number of days you rented it out, whichever is greater.

Mortgage interest is usually reported on Form 1098, Mortgage Interest Statement. After you enter your 1098 in TurboTax, we'll ask a series of follow-up questions to make sure you're qualified to take the deduction.

For tax years 2018 through 2025, you can only deduct the interest from the amount of your loan that was used to buy, build, or improve the home that it’s secured by.

If you’ve ever used part of this loan to pay for things other than this home, you cannot deduct the interest from that amount of the loan, even if the transaction didn’t take place this year.

Don’t worry, we’ll help figure out what amount of interest you can deduct.

Examples of common ways you might have used this money not on your home include:

Making a down payment on a different home
Funding improvements on a different home
Making a payment on a different loan or debt
Having miscellaneous large purchases

Example: John took out a home equity line of credit on his home on Tuberose Street for $40,000. He used $25,000 to remodel his kitchen and bathrooms in his Tuberose Street home, and $15,000 as a down payment on a second house on Snowdrop Lane. He can only deduct the interest he paid on $25,000 he used to improve his Tuberose Street home.

You cannot claim a mortgage interest deduction unless you itemize your deductions. This requires you to use Form 1040 to file your taxes, and Schedule A to report your itemized expenses. The interest payments and points you pay are combined with all other deductions you claim on Schedule A; the total of which reduces your income that is subject to tax on the second page of your tax return.

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Tustin

Level 2

Thank you for the reply and in concept that makes sense - still a bit perplexed why the TT software doesn't pick up on this. My only other question - I can reduce the amount to 750K, no issues but what is the calculation to reduce the interest. I could do something like - I reduced the principal by 5% percent therefor the interest would be 5% less but not sure that is accurate.

Last question (guess I had two) for the mortgages that are paid off I will enter a zero in box 2 - but at the end of the taxes when TT does a check it asks for an amount in the "beginning balance" box - what do I put there?