TurboTax Seems Incorrect dealing with Mortgage Points

Forum|Forum|5 years ago
March 27, 2021
4 replies
59 views

Hello,

I am using Turbotax for 2020 and had refinanced my primary home's mortgage five times in 2020 and paid points for two of the refinances. After entering all refinance data and completing everything else in my return, then doing the Federal return check, Turbotax kept saying that my points were limited. However, I am married and filing a joint return and our average mortgage balance was approx. $520,000, which is well below the $750,000 limit for this situation. I think Turbotax has a software bug in that section.

Mike9241

Level 15

there is a tax provision regarding points paid to refi your principal or second residence. taxpayers who refi with the same lender must amortize the unamortized balance of points on those loans over the life of the new loan. points have nothing to do with the mortgage cap. another feature if any part of the refi is used to substantially improve the qualifying residence, they are immediately deductible. if you do a cash-out refi where the cash-out is not used to make substantial improvements, the interest related to the excess is usually not deductible.

Mike9241

elevenssAuthor

Level 2

Thanks for the response, but the response seems to have nothing to do with the specific question.

The IRS worksheet states that all points are deductible if married, filing jointly, and avg mortgage balance is below $750K. Further, none of the points were for the same lender which would require amortization. All of this criteria was met, yet TurboTax kept telling me that the points are limited and flagging the entry on the worksheet as incorrect. Anyway I ignored the error message and moved on with completing the return.