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Solved

TurboTax Premier Not Deducting Mortgage Interest on Refinanced Mortgage

Forum|Forum|6 years ago
February 12, 2020
8 replies
0 views

My TurboTax Premier software is not deducting mortgage interest on an under $750k mortgage. I refinanced the mortgage and have 3 1098s, 1 from the original, 1 from the new, and 1 from the mortgage servicing company holding it until it was sold. Turbotax will not include mortgage interest at all. I've deleted all the 1098s and re-entered them. I've forced itemized deductions. It does not allow edits to Schedule A. What is wrong with the software?

Best answer by

For box 2 enter $1 that should resolve the issue.

If anyone is having an issue where mortgage interest isn’t being deducted. Go to the “Forms” section by clicking the button in the top right. Then go to the “Tax & Int Wks” and go 3/4 way down to “Mortgage Interest Limited Smart Worksheet” and make sure “Does your mortgage interest need to be limited:” is set to no.

klehnhardt

When you are entering the 1098 information on the refinance mortgage you will come to one screen that ask about what you did with the funds from the refinance. If you designated that you selected that you used some or all of this loan on a different home or something other than a home, you will not be able to deduct the mortgage interest.

sitthirk

this did not work for me. I did not withdraw any funds. When I enter each 1098, it shows the deduction but then once I hit save, the refund goes back down. Why is it deducting the interest even though it should be itemized?

sitthirk

this is how I answered the question but it still removes the deduction from my itemized deductions.

Carl11_2

Employee

Folks need to keep in mind also, that you are limited not only on your mortgage interest deductions, but also on the SALT (State and Local Taxes) deduction which is capped at $10K. So if you have a total of more than $10K for SALT, the amount over $10K is not deductible and therefore your itemized deductions could still be under your standard deduction.

francesjc

THANK YOU!!!

This was driving me crazy!!!

Obviously a bug that Intuit should correct.
I appreciate you posting this so I didn’t need to override the interest! 🙂

susanh1003

I have exact scenario, it worked a couple weeks ago, now it does not. Were you able to get it to work by changing that question from yes to know? I could not change to no.

Cynthiad66

Some TurboTax customers are experiencing the following error message when running the Federal Error Check

Check This Entry:

Tax and Interest Deduction Worksheet: Limited Interest and Points must be entered

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

You cannot claim a mortgage interest deduction unless you itemize your deductions. This requires you to use Form 1040 to file your taxes, and Schedule A to report your itemized expenses. The interest payments and points you pay are combined with all other deductions you claim on Schedule A; the total of which reduces your income that is subject to tax on the second page of your tax return.

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DiddlyD

So there's a limit on mortgage interest I assume even if you don't refinance and then your itemized deductions Sch A total must exceed your standard deduction or Turbo tax takes the standard instead and your mortgage interest is not benefiting or reducing your taxes. I thought this was of the big reasons to own a home and be able to use the mortgage interest to reduce your taxable income. Well we know how the tax cuts for the wealthy were financed.

Lfried3

This sounds like it will work but it will only work if you're using the desktop version not the online version. The online version does not have access to the forms for you

linaj20201

If you have more than one 1098 form, I will recommend you to combine all 1098 forms and enter as one. I am attaching a TurboTax link for the instructions how to do claim your mortgage interests. Click here:

Multiple Form 1098s

For tax years prior to 2018, your mortgage interest deduction is generally limited if all mortgages used to buy, construct, or improve your first home (and second home if applicable) total more than $1 million ($500,000 if you use married filing separately status). Beginning in 2018, this limit is lowered to $750,000. For more information about the mortgage interest deductions, click here: Mortgage Interest deduction

Lfried3

Thanks, I've seen this link. Am I not entering false information on my taxes then?

GMH2

I am so angry. I spent six hours doing our taxes--and our taxes are not that complicated! TurboTax is not doing any deductions. I cannot deduct the interest I paid on our home mortgage or our property taxes. I can't deduct charitable donations to our church.

I have used TurboTax for years. I know how to use the program. I am really pissed!

JohnB5677

The mortgage issue can be solved by realizing that when you get a new mortgage the old one will have been paid off.

The mortgage that you had at the end of 2019, (1st mortgage) will have a principle balance of zero, because it was paid off to secure the 2nd.
The second mortgage will also have a principal balance of zero. Because it was paid off to secure the 3rd mortgage.
Finally, the mortgage you currently have (3rd mortgage) will reflect the principal as of 01/01/2021.

The IRS instructions for completing Form 1098 state that box 2 should be the amount of principal outstanding on the mortgage as of January 1, 2021. If the loan was no longer being serviced by that company, there would be no outstanding principal on that mortgage and the amount should be "0".

Entering '0' into box 2 in your tax return is the correct way to handle a loan that has been closed out.

To enter your 1098 Mortgage Interest statement.

Log into TurboTax
Select Deductions and Credits [Review/Edit]
Mortgage Interest and Refinancing (Form 1098) [Edit/Add]
Add a other 1098 or select your bank
Continue to follow the interview

Note: if you enter your property taxes from your 1098 you will not have to enter them again in the property tax section.

Charity donation:

This is a situation that is known and has been reported.

Clear the amount entered.

Here is the work around for claiming the $300 Charity Deduction:

In TurboTax select Federal in the panel on the left
Select Deductions & Credits at the top of the page
Under Your Tax Breaks -
1. Charitable Donations
Click START to the right of Donations to Charity in 2020
Click YES
Click ADD next to Money
Type in the name of the charity that you donated to
Type the amount of the donation
Select Done with Donation
Select Done

Now the $300 will appear on Line 10B and in the Charitable Contributions screen

CARES Act $300 charitable deduction

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JKARNOLD

I have two 1098's one original loan and a refinance. Same property and under the 750k loan restriction. Interest was 20k but Turbo tax does not allow me to deduct all interest when I enter separately. Turbo tax says to combine both the 1098's and enter as one entry and not two. This seems like band-aid fix to a real problem.

Stoney35

I agree. I refinanced twice last year and both times the loan was sold so I actually have five 1098’s for my return. So if I combine them to one, which one should I list as the Lender as they are all different.

DaveF1006

It really doesn't matter what lender's name you report This information does not get reported to the IRS but listed on your worksheets that are not transmitted to the IRS.

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MommyG5

i had this happen to me except I didn’t question it until after I had already hit submit! I think I should amend my return but do you know how I can fix this on an amendment?

@1196866

DianeW777

Yes, the answer is in your other post and posted here for your convenience.

First you want to start your amended return correctly. Use the link below and select 2020 to amend last year's return, then carefully follow the instructions before you begin.

How to amend a return that has already been filed.

Next, follow the steps below assuming the criteria matches your situation. This should allow you to proceed to complete your amended return if the following statement is true. Add all of the Forms 1098 together to make one entry with the ending mortgage balance of the loan that was the final one in 2020.

if you have a mortgage debt that is below $750,000, (or $1M for grandfathered debt incurred on or before December 15, 2017) this means all of the mortgage interest would be allowed to be used on your itemized deductions as long as there was no cash taken out that was not used on the home (all borrowed funds were used to buy, build or improve the home).

NOTE: If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that isn't more than the cost of the home plus substantial improvements qualifies as home acquisition debt. This means that if 'cash out' proceeds were not used to improve the home they would not be part of home acquisition debt.

Any additional debt not used to buy, build, or substantially improve a qualified home isn't home acquisition debt. TurboTax will calculate the amount of allowed mortgage interest deduction based on your entry or you can choose to make the entries yourself.