I have a Form 1098 with just a refund amount showing in box 4 but Turbo Tax don't let me enter the number in box 4. Please guide me how I can enter this refund.

[amccardy]

This is my old mortgage company. As a result of class action, they refunded my overpaid mortgage interest and issued a form 1098 showing just a refund amount in box 4. Now, in turbo tax, it only guide you to box 1, 5, etc. and skip box 4 which I need to enter the refund.

[Carl]

You are correct in that you have to pay tax on that refund, since it was deducted from a prior year's return. This is not common, so that's why TurboTax does not deal with it in the Mortgage Interest section of the program.

To enter this income and therefore "account" for it, under the Personal Income tab scroll all the way to the bottom and elect to start/update Miscellaneous Income, 1099-A, 1099-C.

Then select Reimbursed Deductions from a Prior Year.

Select Other Itemized Deductions and click Continue.

Then enter the amount from box 4. If this is a joint return, enter it for the person whose social security number is on that 1098.

That should do ya.

[Carl]

Hey @TaxGuyBill I just thought of something. For the year in which they have received this refund *for*, if they did not itemize in the year the overpayment was made, then do they need to claim it as taxable income on the 2017 return? I would think not.

[macuser_22]

It would only need to be reported if it was previously deducted.   If you did not itemize and deducted the mortgage interest then there is nothing to be report since you already paid tax on the money.

[Critter]

Correct all ... you only report it as income if it was deducted on the Sch A in a prior tax year.

[greg29708]

I haven't Itemized since 2017. How far back do I have to recapture the interest deduction. My 1098 doesn't even give a year for the interest overpayment.

[greg29708]

How many years back do I have to go? 10? 15?

[DianeW777]

No, if you were refunded an amount of mortgage interest that you actually used as a deduction on a tax return using itemized deductions in a prior year for this  mortgage,  then this would be considered income in 2023, the year you received the refund.

If you did not use this amount as part of your itemized deductions then there is nothing to report.

Considerations for determination:

1. Date you first took out this mortgage
2. How many years did you itemize deductions using interest from this mortgage
3. Total mortgage interest paid to this mortgage holder for the life of the loan
4. Total mortgage interest deducted on your tax return 
5. Divide 4 above by line 3 above to find the percentage of the interest refunded that might be income

If there is any amount to report follow the steps below.

Go to the Wages and Income  section of TurboTax

1. Scroll to  Less Common Income > Select  Miscellaneous Income, 1099-A, 1099-C
2. Select Other reportable Income > Enter a description (Refunded Mtg Int) and the amount