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Entering mortgage interest increases state tax bill??

Forum|Forum|4 years ago
February 13, 2022
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I am doing my taxes in TT 2021 Deluxe, and am filling out the section for my 1098, a Mortgage Interest Statement.

When I enter the sum in Box 1, my (Washington) DC box switches from a refund to tax due; increasing my tax liability by roughly a third of the mortgage interest amount.

As far as I'm aware, DC does not and never has penalized taxpayers for paying interest on a mortgage. Is this a bug? I've gone through to the end of my taxes, hoping something else later might reverse it, but nothing did.

Inverting the value with a '-' is similar to entering '0'; that is to say, it does not increase my tax liability.

Best answer by justinmm2

Hi Dave,

I am using the software version on my local Mac OS X machine, but fear not, I've figured this out, and will explain in case any one else stumbles across this post in a Google search. Thank you for replying, I appreciate it.

In short, my (federal) itemized deduction was only slightly higher than the standard federal deduction of $12,550. The District of Columbia (DC) requires taxpayers to use the same type of deduction as they do on their federal taxes. However, it calculates the itemized deduction very differently. So while my federal deduction was (just) greater than $12,550, itemizing made my DC deduction many thousands of dollars *less* than $12,550.

By switching to the standard deduction, I increased my federal tax bill only slightly, but that loss is offset many times over by being able to deduct the full $12,550 on my DC tax return, instead of a smaller amount.

Thanks!

DaveF1006

It depends. By entering your mortgage interest, you may have reduced your taxable income in a way that reduced other credits that were in your return. It's hard to say however since I am unable to look at your return. By chance, are you using Turbo Tax Online or are you using the software version?

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J

justinmm2AuthorAnswer

Hi Dave,

I am using the software version on my local Mac OS X machine, but fear not, I've figured this out, and will explain in case any one else stumbles across this post in a Google search. Thank you for replying, I appreciate it.

In short, my (federal) itemized deduction was only slightly higher than the standard federal deduction of $12,550. The District of Columbia (DC) requires taxpayers to use the same type of deduction as they do on their federal taxes. However, it calculates the itemized deduction very differently. So while my federal deduction was (just) greater than $12,550, itemizing made my DC deduction many thousands of dollars *less* than $12,550.

By switching to the standard deduction, I increased my federal tax bill only slightly, but that loss is offset many times over by being able to deduct the full $12,550 on my DC tax return, instead of a smaller amount.

Thanks!