Major Error: Mortgage Interest Limitation Incorrect

[sloan1919]

As you all know, the mortgage interest deduction is limited to $750k for some mortgages, depending on the date. TurboTax (both the Mac desktop and Online versions) are incorrectly using the unlimited amount on the Schedule A box 8a, instead of the limited amount. I checked the Deductible Home Mortgage Interest Worksheet on the Mac Desktop version and saw that it was doing the calculation correctly, but this did not get transferred to the Schedule A in either version. I contacted TurboTax and they connected me with two different CPAs who confirmed the issue. You can see the problem in the attached images.

My concern is: 1) someone else might not have noticed and submitted their taxes with the wrong amount; 2) what is the cleanest way to submit? I guess I could create a fake 1098 with the limited amount as the full amount.

I recorded a video of both the desktop and online versions, but I cannot share it here.

[fanfare]

If you find the TurboTax calculation is incorrect ( as is often reported here),

follow the instructions in IRS PUB 936

and enter the results on your tax return Schedule A.

@sloan1919 

[sloan1919]

You can’t. At least not directly. I can confirm that on both the online and the Mac desktop versions the schedule A 8a box is NOT an editable field. Hence why I mentioned creating a fake 1098 which is where it is pulling the incorrect values from. Also, I obviously know about the guidance in 936 or else I wouldn’t have known the calculation was wrong.

Furthermore, as I stated in my post, TT is doing the calculation correctly they just have the wrong fields mapped together. So schedule A 8a should also (unless overridden) be the same as 22 on the worksheet. They are likely pulling 14 instead.

@fanfare

[fanfare]

yes you have to use your own simplified  1098 to get the proper amount on Schedule A.

Even if TurboTax knows about the problem you can't assume it will be fixed by Oct 15th.

@sloan1919 

[DoninGA]

Line 8a on Schedule A is populated by the Home Mortgage Interest Worksheet Line 2b as reported by the user from the Form 1098 they entered in the TurboTax program.

[sloan1919]

@DoninGA That is just incorrect. Are you even aware of the limits I'm referencing? You can't just take 2b which is the TOTAL PAID. You have to complete the worksheet to see if you are subject to the "new" limits. You should get up to speed on IRS 936 first, specifically:

Part II. Limits on Home Mortgage Interest Deduction

From the IRS:

"

This is where 8a is supposed to come from.

[sloan1919]

That is probably the course I will take. BTW, both of their CPAs I spoke with advised against this but didn't really paint a good reason as to why I shouldn't. Just that it was a really bad idea. lol

[TexDux]

So, I'm having the same issue, but I don't really understand the right way to address it.  

If I override the 1098 information to mis-state my mortgage balance and interest paid to be the amount that it should be (ie -- my actual balance all year was $1.8 million, paid $45k in interest -- TTax is using the full $45K in my deductions -- I could restate the 1098 from the bank to show a balance of $750K and $18,750 in interest), then won't that cause a flag in the IRS system since the 1098 won't match the one filed?

[sloan1919]

@TexDux The worksheets and amount on the 1098s don't go back to the IRS on your return. It really shouldn't matter how you achieve it. As long as the Schedule A is correct, you should be good to go. I did, however, save a personal copy of the worksheet just in case there is a question as to the calculation in the future.

[fanfare]

The only number that appears on your tax return is the deductible amount of interest.

You are responsible to calculate it.

@TexDux 

[TexDux]

Ok.  Thanks.  

[Jcbbmine]

I have encounter the same problem. And what bothers me is the California return; as California allows principal up to 1m. Form540 calculation looks super wrong even though the final number is correct (I enter the correct number myself) I believe form 540 is submitted to California tax bosrd

[Jcbbmine]

Nvm worksheet is probably not submitted. Anyways, the error is very annoying, I will probably submit refund for turbo tax, wasting so much of my time. 

[Jcbbmine]

Another thing, if one enters property tax for rental property under deduction and also claim schedule E; turbo tax will still count rental property property tax deduction under SALT even though I have listed it as non primary nor secondary. TurboTax so bad….

[sloan1919]

I need to check this too. Thanks