Question

I refinanced my home and purchased a point and then my loan was sold to another lender. I have three 1098 forms and a lot of questions

Forum|Forum|5 years ago
February 1, 2021
1 reply
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Hello,
I refinanced my primary home in 2020 from the original lender of the loan (call it Lender A) . My refi started through Lender B and I paid 1 point for a lower interest rate. I made one monthly payment to Lender B. The loan was then sold to Lender C. I now have 1098 forms from each lender.

First question - When exactly do I input the point I bought on my refinanced loan? My initial impression is to enter it with the 1098 information from Lender B - the lender that I started the refinance with. Then when I enter the 1098 information for Lender C, I do not duplicate the information about the point..is this correct?

Second question - On the 1098 forms from Lender B and C, the Mortgage origination dates (Box 3) to do not make sense. The date on the 1098 from Lender B is a month after the date on the 1098 from Lender C. Does this matter?

Third question - I've noticed that once everything is all entered, the amount of Mortgage Interest that is deducted is about half of what it was last year even though the amount of interest paid was nearly the same. Can someone explain why refinancing has made the deduction so much less?

I hope my questions make sense. Let me know how I can make anything more clear. Thank you!!

C

Cynthiad66

First question. You entered the points accurately and do not duplicate. Second question does not matter. The third question might be based on how you answered questions about the refinance. Was this a Cash Out refinance? What you did with the money? Here is some information that will assist you.

It’s important that we go over exactly how cash-out refinances work before we look at how the IRS views the money you get from this transaction. Basically, you replace your existing mortgage with a loan that has a higher principal balance. Your lender then gives you the difference in cash. You can use the money from a cash-out refinance for almost anything. Many homeowners use it to consolidate debt or make home improvements.

The cash you take out of your equity during a refinance isn’t considered income by the IRS. However, there are limitations on deductions that you can take when you refinance your loan. You may only discount interest you pay on your new loan if you use your cash to make a capital improvement on your property.

Something to keep in mind is that refinancing your mortgage can significantly reduce your total tax deductions. Refinancing to a lower mortgage rate means you'll be paying less interest, which means you'll have less mortgage interest to deduct when tax time comes around. The difference can be substantial.

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L

lchanAuthor

Thank you for your response. It helped to answer my first two questions. I didn't pull any cash out in the refi, so that simplifies that, at least.

After more reading on here I've figured out that the problem is that TT is adding all the mortgage values together instead of averaging them. This puts me over the cap and thus limits my deduction. TT needs to find a fix to this problem. A lot of people are having issues with this.

DaveF1006

Some TurboTax customers are experiencing an issue with their Home Mortgage Average Balance. This can cause in the 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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