Question

Home Mortgage Interest Bug - No Itemized Deductions when listing refinance

Forum|Forum|4 years ago
March 29, 2022
1 reply
0 views

My mortgage interest is ~$30k plus ~$10k for state taxes, and thus itemized deductions should clearly be better than the standard deduction. However, Turbotax seems to have some bug in doing this correctly:

- If I enter my form 1098 as-is, I get capped at $750,000 and thus get only about $20k in mortgage deduction. In this case it shows up as itemized deduction.

- However if I add the information that this is a refinance and the correct dates, then a cap of $1,000,000 should be used and I get about $25k in mortage deduction. Turbotax shows that correctly in the overview, but in this case does not use it to itemize and suggests using the standard deduction. If I force itemized deductions, only the $10k for state taxes show up.

Any advice on how to fix this? Thanks.

TurboTax Deluxe Online

A

andy183Author

Ok, I can fix this by putting the original date of the mortgage (not the refinance date) into Box 3; Mortgage origination date. In other words, I have to fill in the data of form 1098 incorrectly. There's even a question at the bottom of the webpage asking if mortgages over $750k are the same, and the help text there suggests to do it exactly like this.

It would be nice if this could be fixed - in this case the Turbotax error would have cost me $6,000 had I not noticed it!

J

JillS56

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.

Under tax law, you're limited on the amount of home interest you can deduct. The limit is based on the loan amount and date of the origination of debt. We want to make sure we calculate this correctly for you.

If you refinanced last year, you’ll have a Form 1098 from your previous lender and one from the lender you refinanced with. You’ll need both forms.

Follow these steps to enter your mortgage info:

Gather all of your 1098 forms related to your refinance (the form from your original lender and the form from your new lender).
Grab a calculator and add together the box 1 amount from each form. Enter the total in TurboTax as Box 1 Mortgage interest.
Add the Box 5 amount from each form and enter the total as Box 5 Mortgage insurance premiums. (If you weren’t required to pay mortgage insurance, these boxes will be blank on your forms and you won’t enter anything.)
Add the property tax paid from each form and enter it in the Property (real estate) taxes box.

Next, finish adding info for boxes 2, 3, 7, and 11 using Form 1098 for the original loan.