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dina_sm
Level 1

What should be the outstanding loan balance for a refinanced mortgage?

I refinanced my mortgage twice in 2020, so I have three 1098's for that year. I entered all three of them. When I click 'Done' the program asks for the additional information:
 
1. Outstanding loan balance on 1/1/21? If you paid this off in 2020 enter the balance on the day you paid off
2. When did you make your final payment?
 
I entered outstanding loan balance $0 for the first two lenders (since these loans were paid off) and my loan balance as of 1/1/21 for the third lender (current loan, which is approx. $450K). Is this this correct? I got the warning 'Outstanding loan balance is missing a value' and the program did not deduct all the interest from three landers (it came up with some strange smaller number instead). 
If I enter the loan balance value other than zero for the first two lenders, the deduction amount is reduced further, which tells me the system may be adding these loans up instead of treating it as a refinance. What should I do to have all the interest deducted correctly? What should be the loan balance for each lender on the follow up screen (question #1 above)?
13 Replies
AlanT222
Expert Alumni

What should be the outstanding loan balance for a refinanced mortgage?

For individuals with more than one 1098.  

 

Some TurboTax customers are experiencing an issue with their Home Mortgage Average Balance. This can cause the Home Mortgage Interest to be incorrectly limited.

If you're experiencing the issue above, please go here to receive email notifications when any updates related to this issue become available.

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family_c
New Member

What should be the outstanding loan balance for a refinanced mortgage?

The fix here has been outstanding for a while.  Background, we refinanced twice in 2020 and the 2nd re-fi was late in November, so our first payment on the new loan was 1.1.21.

 

02.04.20 - 1st call in was with an agent that showed me how to get past the smart check.  After she ended the call, I attempted to file electronically.  The software I think re-runs the smart check at that point and the error was still present.  I pretty much knew it was a software error, but just in case, I checked with my mortgage firm (one of our banks) and they confirmed that a blank was appropriate for the outstanding loan balance on the 1098.  Thinking that an update was coming, would open up Turbotax once a week and find the same error.

 

03.19.20 - 2nd call in I was connected with Theresa.  Thorough, thorough, thorough woman who listed.  Her only request of me was patience.  She found this thread and AlanT222's link to receiving an email when the update has been applied.  So we wait.  But, thanks to Theresa's listening skills, knowledge of the support system and AlanT222's advice, I am comforted that this will get fixed.

 

Suggestion: why doesn't Turbotax a) number it's error messages, b) identify them to the turbotax fields involved and c) provide a link to current status and/or instruction?  That would seem a less expensive approach?

hanxiaobow
New Member

What should be the outstanding loan balance for a refinanced mortgage?

Is there a fix of the problem? I'm experiencing the same problem

Cynthiad66
Expert Alumni

What should be the outstanding loan balance for a refinanced mortgage?

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.   Also, remember that TurboTax must wait for a finalized form the IRS before we can complete programming on this side.  We have not been given an  expected date for the fix yet.  Please check back often to see if you can file your return.

jkert25
Returning Member

What should be the outstanding loan balance for a refinanced mortgage?

Is this fixed?

 

As of today 04/13/2021, I am facing the same issue.

 

I received multiple 1098s due to refinance and the interest did not deduct correctly.

JohnB5677
Expert Alumni

What should be the outstanding loan balance for a refinanced mortgage?

This may be a work around if you have multiple 1098s.  I suggest you enter each one separately.

 

If a Mortgage is paid off, or re-financed you should:

  • Enter $1 in Box 2 Outstanding Mortgage principal for the Refinanced / Paid off mortgage
  • Every 1098 should be posted.
  • The final 1098 for that property will have the full loan amount as reflected in Box 2.
  • If you have multiple properties, you should follow this procedure for each property.

 

This will properly record every 1098, and avoid any issue with mortgage limitations.

 

When you have more than one Form 1098 with the refinance info and both show the same balance of the mortgage, TurboTax adds the amounts together. And that may lead to a limitation of the deduction, because the balance is then overstated. To avoid this, make sure that you're not reporting the same mortgage balance twice.

 

If your combined home debt is under $750,000 ($750,000 for married filing jointly and $375,000 for married filing separately), there's nothing new for you to do in 2020. Enter each 1098 as you normally would.

 

@jkert25

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Rjad1999
Level 1

What should be the outstanding loan balance for a refinanced mortgage?

@Cynthiad66 since you mentioned TurboTax must wait for IRS for the new rules. While waiting, can you fix those existing issues. I assume home mortgage deduction rule hasn't changed in 2020, or has it?

 

@JohnB5677 if I put $1 in the first two lenders (paid off already during refinance), and only real number in the third lender, I see $1 somehow got transferred to the State (CA) section as $1 Mortgage Interest Adjustment. What should be the real number in the CA mortgage interest adjustment?

sortech
New Member

What should be the outstanding loan balance for a refinanced mortgage?

Does anyone know when will this issue be fixed? The filing deadline is coming up soon and I am sure many of us is trying to finished filing.

dude170
Returning Member

What should be the outstanding loan balance for a refinanced mortgage?

Looks like it is still no fix..As of May 3!

DaveF1006
Expert Alumni

What should be the outstanding loan balance for a refinanced mortgage?

Actually there is a fix.  It is combining your original and refinanced 1098's. Use the original loan balance in the original 1098 and then combine the mortgage interest amounts, mortgage insurance premiums, and property tax amounts if reported in your forms.

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Rjad1999
Level 1

What should be the outstanding loan balance for a refinanced mortgage?

Are you suggesting instead of inputting the three individual 1098s from the three lenders, I should input a fake 1098 with all the information properly combined from the three 1098s? Turbotax can then work properly.

Cynthiad66
Expert Alumni

What should be the outstanding loan balance for a refinanced mortgage?

Yes.  It is a workaround that has worked for the most part.  Make sure Box 2 only has current outstanding loan balance.  Do Not add those together.

VKNK
Level 1

What should be the outstanding loan balance for a refinanced mortgage?

Thanks, Cynthia. Hope that work around is acceptable to IRS if they are not counting # of 1098's entered. In Schedule A  all they care is the final mortgage amount. 

 

Does anyone know if this issue is fixed yet, its barely a week before tax filing deadline. The fix could be as simple as taking the least of the Box 2 of all 1098's, if that number > 750k divide it by that amount and multiply that decimal with addition of all box 1 amounts, not sure why it should take so much time to fix it. 

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