Average mortgage balance doubled when reporting interest/points reported on someone else's 1098

r7free
r7free Member Posts: 5 Newcomer
in Filing my taxes

Hello!

I am reporting mortgage interest and points paid on someone else's 1098.

Everything seems straightforward until I reach a page titled "Tell us more about each loan shown below" and subtitled "Based on the information you've entered, your mortgage interest deduction may be limited. Please fill in the information below for each loan."

The page includes 6 fields, 2 of which are prefilled:

"Mortgage Lender" (prefilled)
"Loan balance as of January 1, 2025"
"Purchase Date"
"Person Who Received the Form 1098" (prefilled, not me)
"Loan balance as of January 1, 2025" (again)
"Purchase Date" (again)

When I fill all this information out, the next screen, "Confirm your average mortgage balance", includes a pre-calculated estimated average mortgage balance that is double the value it should be.

Is this a bug in FreeTaxUSA or am I entering information incorrectly on the "Tell us more about each loan shown below" page?

If it's a FreeTaxUSA bug, can I safely overwrite the doubled average balance with a correct value?

Thanks in advance for any help :)

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Best Answer

  • MatthewD
    MatthewD FreeTaxUSA Team Posts: 581
    Answer ✓

    That page with "Loan balance as of January 1, 2025" is to help determine if the loan interest is limited due to a loan balance over $750,000.

    What was the loan origination date? One of the questions asks, "Outstanding Mortgage Principal as of January 1, 2024:" on the "Tell us about your mortgage interest on someone else's Form 1098" page. If you purchased the home in 2024, that amount should be $0. Otherwise, the software will pick up an amount from the mortgage interest page and the points page and if the combined amount is over $750,000, it will take you to the page to enter the balance as of Jan 1, 2025.

    Check that out and see if that solves the problem. You may want to contact Support directly, when signed into your account, so they can see the details.

Answers

  • MatthewD
    MatthewD FreeTaxUSA Team Posts: 581
    edited February 26

    Hi r7free,

    No, it isn't a bug, but it can be misleading. Particularly when you have a mortgage that is sold. Did you get two 1098's? If so, you may safely override that amount

  • r7free
    r7free Member Posts: 5 Newcomer
    edited February 26

    I did not get two 1098s, no, and the mortgage was not sold. My (non-spousal) partner received the 1098 for which I paid (some) points and (all) interest.

  • MatthewD
    MatthewD FreeTaxUSA Team Posts: 581
    edited February 27
    https://community.freetaxusa.com/discussion/comment/4537#Comment_4537

    Thank you for that information. Generally you should only enter a 1098 that is in your name. Since that 1098 is not in your name, you may be limited to claim the interest paid on it. The payment may be though of as a gift to your partner.

  • r7free
    r7free Member Posts: 5 Newcomer
    https://community.freetaxusa.com/discussion/comment/4550#Comment_4550

    That is not my understanding, I believe it is possible to deduct interest paid that is not on a 1098 issued in your own name. See https://www.irs.gov/faqs/itemized-deductions-standard-deduction/other-deduction-questions/other-deduction-questions-2, "Your housemate, who didn’t receive a Form 1098, must list the amount of mortgage interest on Schedule A (Form 1040), line 8b, as “Home mortgage interest not reported to you on Form 1098” "

  • MatthewD
    MatthewD FreeTaxUSA Team Posts: 581

    Hello,

    Thank you for the information. Generally speaking, you must have an interest in the mortgage or home. You can use the "I have Other Expenses" option on the "Tell us about your home" page to get to a section to enter mortgage interest not on a 1098. Answer Yes to the question, "Did you pay mortgage interest on a Form 1098 issued in the name of another person?" on the "Other Mortgage Interest Paid" page.

  • r7free
    r7free Member Posts: 5 Newcomer

    Thank you again, Matthew.

    I had already done this:

    • "You can use the "I have Other Expenses" option on the "Tell us about your home" page to get to a section to enter mortgage interest not on a 1098. Answer Yes to the question, "Did you pay mortgage interest on a Form 1098 issued in the name of another person?".

    I also answered:

    • "No" to "Did you pay mortgage interest on a seller-financed loan?"
    • "Yes" to "Did you pay any points that are NOT on a Form 1098?" (though this question is confusingly worded, as the points were reported on A form 1098, just not one issued in my name)
    • "No" to "Are you amortizing any points in 2024?"
    • "No" to "Did you pay any mortgage insurance premiums that are not on a Form 1098?"
    • "Yes" to "Did you use all of the money from your mortgage loans to buy, build, or substantially improve your home?".

    I entered points information one page later.

    Then I reached the "Tell us more about each loan shown below" page, which is where I am required to enter "Loan balance as of January 1, 2025" twice and "Purchase Date" twice. The following "Confirm your average mortgage balance" page then has the incorrect estimated average balance (2x what it should be).

    Have I made a mistake in the answers above?

    I can also provide detail on how I filled out the points page if that might be relevant.

    Thank you!

  • r7free
    r7free Member Posts: 5 Newcomer

    Legend, thank you! I had incorrectly entered the initial mortgage amount as the Jan 1 2024 balance on the "Tell us about your mortgage interest on someone else's Form 1098" screen 🙈

    After correcting this misstep all is well.

    Thank you for your patience with me on this one :)

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