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Level 2
posted Apr 4, 2022 12:33:37 PM

Refinance penalty (more tax due when selecting the loan is refinanced)

I refinanced my house in 2020 (principal < $750k, purchased before 12/15/2017, no cash out when refinanced). When I entered the 1098 received for 2021, I found I owned $4k more federal tax when I select Yes for "Is this loan a home equity line of credit or a refinance of a previous loan" than selecting No for the question.

 

I am married filling separately by the way.

 

More specifically, I answered No for "Is this the original loan you used to buy your property",  Yes for "Is this loan a home equity line of credit or a refinance of a previous loan" and No for "Did you take cash out when you got this loan"。

 

That sounds like I got some penalty when refinancing my house. Did I get it wrong?

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1 Replies
Expert Alumni
Apr 4, 2022 1:10:23 PM

No, there is not a penalty for refinancing your house.  You can go back and delete that W2 and re-enter. 

 

 Are you entering more than one 1098?  If so, does the total balance exceed $750,000?  If so, this would cause your total balance to be too high so part of your interest would not be deductible.