Mortgage Interest Limit keeps defaulting to Yes

Forum|Forum|5 years ago
January 24, 2021
2 replies
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Hi all,

I refinanced a mortgage in 2020 and have a total of $21k of interest to deduct. When TurboTax is reviewing my forms it says I need to enter an amount of Limited Amount to report. For some reason the "Does your mortgage interest need to be limited" keeps defaulting to Yes. The mortgage amount is below the $750k limit, so I think there is a glitch.

Turbotax must be using the combined mortgage amount (which would be over $750k) of my two 1098s.

Is anyone experiencing this? Any TurboTax representatives know if this is a known issue and if there is a patch for this?

thanks!

TurboTax Premier Online

Best answer by Betty100

Carefully answer all questions relating to both mortgages.

When the software knows a mortgage was refinanced during the year, it will then know to not add that mortgage balance into the calculation to determine if the mortgage exceeds the 750K cap.

If this cap is exceeded, then the mortgage interest is subject to limitation.

Carl11_2

Employee

Your mortgage may be under the limit. But did you cash out on the refi? If so, and you did not use the cash out money to improve or maintain the property, then the interest paid on the cash out amount is not deductible.

Typically, when you refinance a house and cash out, you can only deduct the interest paid on the amount of the "old" loan at the time you refinanced. Example:

You owe $50K on the property and you refi for $100K, which leaves you with $50K in your pocket. Therefore, only 50% of the new loan was actually used to refinance the property. Only 50% of the interest on the new loan is deductible on SCH A for the life of that loan.

There are things that can change/increase that percentage though. For example, if you used money from the cash out to add on to your home, then that can be included in the percentage of interest you're allowed to claim on the new loan.

D

dkhuang10Author

Employee

Hi @Carl11_2,

No, I did not take any cash out. Maybe I answered one of the follow up questions wrong?

On the old loan, I did say that it was refinanced and made sure to select that it was a load which was paid off in 2020.

Any other ideas?

Thank for your input!

W

wdr03

So what answers did you put then? I can't figure it out, it keeps adding mine together so it is defaulting to yes saying I need to limit my deduction. I also just refinanced and did not take out any extra money.

P

pandrew3

same problem here, none of the solutions listed work. I have deleted the forms, started completely over, changed the order that I input, changed selections. Nothing fixes this, has to be a glitch. Others still having this issue??