I don't believe my mortgage interest deduction is calculating correctly. My calculation is significantly different than that of TT. Any advice?

[LenaH]

In most cases, you can deduct all of your home mortgage interest if you itemize your deductions on Schedule A. There are a few limitations on the home mortgage deduction, which depend on the date of your mortgage, the amount of the mortgage and how you use the mortgage proceeds. TurboTax will calculate your deduction based on your input of your 1098. 

I have attached a chart from the IRS website that may help determine if any of these criteria apply to your situation. 

For more information, please see Deducting Mortgage Interest FAQs.

[tarolyn-robertso]

Hi Lenah, thank you for your reply. I fall into the category of limiting the mortgage interest of up to $750,000. This has applied to my taxes for the past three years. The first two years I had to calculate this interest myself. This year turbo tax is calculating it for me and it’s calculation is grossly different than my own. I don’t think the calculation is correct and would like to know how it’s being calculated. 

[LenaH]

TurboTax is calculating your deductible mortgage interest by taking the loan limit ($750,000 in your case) divided by your outstanding loan balance. Then, that percentage is multiped by your mortgage interest as shown on your 1098. This amount is then deducted on your tax return on Schedule A. 

To show you an example of how it is calculating, I created a mock-up return using these figures: $50,000 in mortgage interest, $900,000 in outstanding principal and a mortgage origination date of 12/31/2018. The limit in this case was also $750,000. I have attached a picture of part of the deductible home mortgage worksheet. 

[tarolyn-robertso]

I fully understand what you're telling me.  My calculations match yours.  However, Turbo Tax isn't coming up with the same numbers.  I have two 1098's and it appears it recognizes the first one correctly.  When I add the second (which adds nearly double the interest) it then reduces the amount of interest able to write off...which quite frankly makes no sense nor does it match the calculation you provided as an example.  

To be frank, I believe there is a flaw in the software.  If I were to combine the amount of interest from both 1098's to one entry (which I know I shouldn't do for accuracy), the amount to write off matches that of my calculation and yours.  It's when entering two 1098's there is a problem.  

[DianeW777]

Thank you for providing this information. We are aware of this experience. Please sign up for email notification when an update related to this issue is available here.

[dapperduane]

Wow, it's 2024 and my home/business software for TT desktop 2023 year has this same problem. I guess they can't figure it out. Like you, I have two 1098s and the second one (a heloc) only calculates the deduction correctly if I enter $1000 or less for the mortgage balance. As soon as I enter $1 over $1000 for this second 1098 the deduction decreases by $3 for every $1 increase in mortgage balance over $1000. What Are we left to do? If I combine the balances of the 1098 and enter them as a single form it calculates the deduction correctly....

[PatriciaV]

There are some uncommon situations where TurboTax cannot fully calculate the deductible interest. For this reason, you have the option to override the program calculations in favor of the interest you calculate. 

To enter this adjustment, go to the Home Mortgage Interest topic and click "Continue/Done" at the bottom of the list of 1098's you have entered. On the page "Your mortgage interest is being limited," enter the adjusted amount of deductible interest (and points, if applicable) in the provided boxes.

@dapperduane