multiple 1098s

[tiffannie18]

Last year in 2020, we sold our old home and purchased a new one. Later in the year, we then refinanced our mortgage, so we have a total of three 1098 forms. How do I file these? One is one lender and the other two 1098 forms are from the same (but a different) lender. The "old" house shows an outstanding balance on the form, even though we have since paid off with the sale of our home. I am unsure whether or not to add all of these together, which would look like we owe a whole bunch of money. I also question whether I should put them all together since they are different lenders? Thank you!

[DMarkM1]

First delete all the 1098s you have entered to get a fresh start.  Then enter the sold home separately as it's own entity and indicate that the loan was paid off.  

Next combine the two1098's for the new home/refinance using the steps in this link.  

Use the refinance lender identification numbers as that is current.  Combine boxes 1 and 5 and the property tax boxes from the two forms.  Then use the original loan 1098 for boxes  2, 3, 7, and 11 as applicable.   

[tiffannie18]

How do I "indicate that the loan was paid off"?

[LinaJ2020]

You will need to go back to the mortgage interest section.  Here are the steps:

In TurboTax online,

• Sign in to your account, select Pick up where you left off
• At the right upper corner, in the search box, type in "1098" and Enter
• Select Jump to 1098
• Follow prompts
• On screen, " Was this loan paid off or refinanced with a different lender in 2020?", select Yes
• See image below

@tiffannie18

[tiffannie18]

I am not seeing any prompt asking about it paid off... It is showing both lenders and just has the "edit" or "delete" buttons available. 

[ToddL99]

For the two loans that were "paid off" (old house and 1st loan on new house),edit the entries to show $1 as the ending mortgage principal balance.

This will not have any effect on your tax calculation and will not generate an error in either TurboTax or with the IRS.

From an economic perspective, it is accurate - you owed virtually nothing on these two mortgages at the end of 2020. 

There are many places in TurboTax where you must make a non-zero entry, primarily to let the program know that you answered the question and that the answer makes some sense.  

In this case, entering "$1" tells the program that you didn't forget to answer the question and that you had at least some amount of a mortgage loan balance to justify claiming an interest deduction. 

[tiffannie18]

Thank you! I did try entering zero for the outstanding balance and it wouldn't let me move forward, so I wasn't sure what to do. Is it okay that I do know see the question about it being paid off?

[ReneeM7122]

Yes it's ok that you don't see the question about the mortgage being paid off.  Here are all the complete steps that will walk you through handling multiple 1098 forms:

How do I handle multiple 1098 mortgage forms?

If you have multiple 1098 mortgage forms, you’ll enter them one at a time. After going through the steps with the first one, you can add a lender when you get to the Mortgage deduction summary screen. (In the case of a refinance, it's best to enter the 1098 from your original loan before the 1098 from your refinance.)

But, if they're both from the same lender, and one of them has the “Corrected” checkbox marked at the top, enter the corrected 1098 and discard or shred the other one.

What do I do if I have multiple 1098s from refinancing my home debt?

If your total home debt is under $375,000 ($250,000 for married filing separate) there is nothing new for you to do in 2020. Enter each 1098 as you normally would.

Home Debt Over $375,000

Under tax law, you are limited on the amount of home interest you can deduct. The limit is based on the loan amount and date of the origination of debt. We want to make sure we calculate this correctly for you. 

If you refinanced last year, you’ll have a Form 1098 from your previous lender and one from the lender you refinanced with. You’ll need both forms. 

Follow these steps to enter your mortgage information:

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 interest, 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.

Next, finish adding info for boxes 2, 3, 7, and 11 using Form 1098 for the original loan.

What if I have more than two 1098s?

You should combine all of the 1098s directly related to the refinance and enter it as one 1098.  An example of this is if you refinanced two loans into one loan. Any 1098s not directly related to the refinance should get entered separately.

What if I paid points?

Points on Loans Paid Off in 2020: Enter the points on your 1098 you have started and mark you paid off the loan when promoted.

Points on Loans on New Loans: You will want to enter a separate 1098 to cover these points paid. When prompted, enter 0.00 for Boxes 1, 2, 5, and the Property (real estate) taxes box, and checkbox 7, as you’ve already entered the details on your first 1098. For Box 3, add the date in 2020 when the loan originated.

 Here is a TurboTax FAQ about deducting Mortgage interest.