Deductible Home Mortgage Interest Worksheet 2020 - Error Avg Balance

[42Amy1]

@DMarkM1   @LinaJ2020  

Can someone please address this situation?

When following all the directions, including noting that both original loan and refinanced one were 100% acquisition debt, deductibility on the refi interest was NOT limited at all, as it should have been! (both orig and refi loan were over the $750k Limit)

I answered correctly that both had cash-out and both used entirely for improvements on the house, (both are 100% acquisition debt) but shouldn't the interest deductibility on the refi loan (2020) be limited

What am I missing or what is TT missing?

[HeatherPLO]

Please see the Help Article here for further assistance.  

[Mikemcna]

@HeatherPLO this help article does not address the scenario I raised.  Two houses, with different mortgage origination dates, one being in 2020.  The straight addition of balances greatly reduces the mortgage interest deduction.  The IRS-allowed interest averaging, which I described in the post earlier in this thread, results in full deductibility of interest (in the circumstances mentioned).  TT has not addressed anything other than the refi issue, and I’m really not confident the work around there is sufficient.

[TerukoL]

We take your concern very seriously and wish to help address this.  Unfortunately, in this public forum, we do not have direct access to your account, so we invite you to please contact our TurboTax customer support team to assist your further.

[kca1]

Thank you - this is helpful!  Can you elaborate how to access the "limited worksheet"?

i.e. where / how is the best place for me to manually enter my calculation?

[nichojo6]

Go to Forms, and look for the Tax and Int Worksheet. Scroll down to Mortgage Interest, and enter your value. You’ll have to calculate your value offline 

[DianeW777]

The images below will give you an idea of where to enter this information in TurboTax CD/Download version.  However please review the information below so that you enter the correct amount of allowed mortgage interest for your itemized deductions.

NOTE: If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that isn't more than the cost of the home plus substantial improvements qualifies as home acquisition debt. This means that if  'cash out' proceeds were not used to improve the home they would not be part of home acquisition debt.

Any additional debt not used to buy, build, or substantially improve a qualified home isn't home acquisition debt. TurboTax will calculate the amount of allowed mortgage interest deduction based on your entry or you can choose to make the entries yourself.

• To review the information and worksheets you can use this link: IRS Publication 936, page 12

[taxhelpneeded12341]

Hi Heather - I had the same problem as others, and this page you referred to helped, but only to a certain extent.  I have five 1098s due to two refinancing and various transfers of my loan to new services.  To be clear these are all for the same loan or refinanced loan -- I never had more than one loan at a time.  The slight twist is that the payoff balance of the first loan was just over 375K and the rest were under, just due to principal payments over the course of the year.

Following the advice of the help page, I added them up, but I'm still a bit stumped on what to enter into TT.  For example, which lender name do I use.  Which mortgage balance do I use?  The page says use the "original" balance, but I'm not sure if it makes a difference if that was the only one over 375K?

[seniorfam]

Have folks gotten this to work yet?  I’m still having problems.

[Cynthiad66]

There is a known problem with Home Mortgage Deduction.  TurboTax is working to fix the problem and the many other issues. There are many changes due to the CARES Act that require software upgrades.  We have not been given an  expected date for the fix yet.  Please check back often to see if you can file your return.

OR

In the meantime, you can try this work around.  You did not provide the details of your Mortgage situation and therefore I am giving you a general work around that might help.  Please try this.

If there is a refi and there was an outstanding mortgage principal listed in both of them on Line 2 on the 1098. When you do put an outstanding balance in both forms, then the program adds them together and if that number is greater than $750k, then it puts you in the category to "limit interest". To get that to go away, you need to go back to the deductions section and click on "edit" mortgage interest statement. Change the line 2 of the mortgage that you no longer owe on (like the one that you refinanced and paid off) to a 0 (zero) because you have refinanced out of that loan and no longer have an "outstanding mortgage principal". Once you change one of them to zero (the one that was paid off by the refinance) then it should no longer pop up with that error at the end when you go to file. 

[ladyluck123]

I'm concerned that TurboTax is advising us to submit information to the IRS that does not correlate with our 1098 forms. I'm saving this thread as evidence that I've been advised by TT to do so.

Edit: following the steps from Cynthia results in an error when it comes time to file: "Beginning principal must be entered." Should we be entering box 2 (outstanding mortgage principal) here?

[Cynthiad66]

Change the line 2 of the mortgage that you no longer owe on (like the one that you refinanced and paid off) to a 0 (zero) because you have refinanced out of that loan and no longer have an "outstanding mortgage principal". Once you change one of them to zero (the one that was paid off by the refinance) then it should no longer pop up with that error at the end when you go to file. 

[Rosebud99]

Hi "Cyntiad66".  I see one issue with your suggestion.  Line 2 will not accept a Zero Value on the desktop version of TT for MacOS.  Line 2 requires at least a nominal value of $1.00.  

[mkadlece]

To get zero for that value, I went into the forms for the Home Interest Worksheet. Under the "Home Mortgage Interest Limitation Smart Worksheet" on line "E" enter 0.   I am hoping that they will fix this little bugger quickly as there is just 4 weeks to go, and I prefer to have it report correctly. As, using the forms as they are in EasyStep, it does not allow me to take my full deduction and limits me to the standard deduction when everything is filled in correctly.

[Nunayobidness]

I've overridden to the correct average mortgage values, which works, except the "yes" box for limiting mortgage in the Tax and Int Worksheet is marked and can't be overridden. I doesn't effect the outcome but I'm worried it may raise a red flag.

Wouldn't the partial year average mortgage calculations be corrected if TT had a place to enter the interest rate of the new mortgage?