Table of Contents
- Specific Instructions
- Mortgage Defined
- Who Must File
- Nonresident Alien Interest Payer
- Payer of Record
- Payments by Third Party
- Seller Payments
- Prepaid Interest
- Prepaid Mortgage Insurance
- Reimbursement of Overpaid Interest
- Statements to Payers of Record
- Recipient's/Lender's Name, Address, and Telephone Number Box
- Payer's/Borrower's Name and Address Boxes
- Account Number
- Box 1. Mortgage Interest Received from Payer(s)/Borrower(s)
- Box 2. Points Paid on Purchase of Principal Residence
- Box 3. Refund of Overpaid Interest
- Box 4. Mortgage Insurance Premiums
- Box 5. Blank Box
Use Form 1098, Mortgage Interest Statement, to report mortgage interest (including points, defined later) of $600 or more received by you during the year in the course of your trade or business from an individual, including a sole proprietor. Report only interest on a mortgage defined later.
The $600 threshold applies separately to each mortgage; thus, file a separate Form 1098 for each mortgage. You may, at your option, file Form 1098 to report mortgage interest of less than $600, but if you do, you are subject to the rules in these instructions.
If an overpayment of interest on an adjustable rate mortgage (ARM) or other mortgage was made in a prior year and you refund (or credit) that overpayment, you may have to file Form 1098 to report the refund (or credit) of the overpayment. See Reimbursement of Overpaid Interest later.
You need not file Form 1098 for interest received from a corporation, partnership, trust, estate, association, or company (other than a sole proprietor) even if an individual is a co-borrower and all the trustees, beneficiaries, partners, members, or shareholders of the payer of record are individuals.
A mortgage is any obligation secured by real property. Use the table below to determine which obligations are mortgages.
Real property is land and generally anything built on it, growing on it, or attached to the land. Among other things, real property includes a manufactured home with a minimum living space of 400 square feet and a minimum width of more than 102 inches and which is of a kind customarily used at a fixed location. See section 25(e)(10).
If property that secures the loan is not real property, you are not required to file Form 1098. However, the borrower may be entitled to a deduction for qualified residence interest, such as may be the case for a boat, which has sleeping space and cooking and toilet facilities, that the borrower uses as a home.
File this form if you are engaged in a trade or business and, in the course of such trade or business, you receive from an individual $600 or more of mortgage interest on any one mortgage during the calendar year. You are not required to file this form if the interest is not received in the course of your trade or business. For example, you hold the mortgage on your former personal residence. The buyer makes mortgage payments to you. You are not required to file Form 1098.
For information about who must file to report points, see Who must report points later.
You must file Form 1098 to report interest paid by a nonresident alien only if all or part of the security for the mortgage is real property located in the United States.
Report the interest based on the following.
If the interest is paid within the United States, you must request from the payer the applicable Form W-8 (withholding certificate) as described in Regulations section 1.1441-1(e)(1).
If the interest is paid outside the United States, you must satisfy the documentary evidence standard described in Regulations section 1.6049-5(c).
The payer of record is the individual carried on your books and records as the principal borrower. If your books and records do not indicate which borrower is the principal borrower, you must designate one.
If you permit a subsequent purchaser of the property to assume the loan without releasing the first purchaser from personal liability, the subsequent purchaser is the payer of record. Such subsequent purchaser's name, address, and TIN must appear on Form 1098.
Report all interest received on the mortgage as received from the borrower, except as explained under Seller Payments, later. For example, if the borrower's mother makes payments on the mortgage, the interest received from the mother is reportable on Form 1098 as received from the borrower.
However, do not report mortgage interest received from any governmental unit (or any subsidiary agency). For example, do not report any interest received as housing assistance payments from the Department of Housing and Urban Development (HUD) on mortgages insured under section 235 of the National Housing Act.
Also, do not report as interest mortgage assistance payments provided by HUD's Emergency Homeowners' Loan Program (EHLP), state housing finance agencies receiving funds allocated from the Housing Finance Agency Innovative Fund for the Hardest-Hit Housing Markets (HFA Hardest Hit Fund), or other similar state programs receiving funding from the EHLP. Instead, report such payments on Form 1098-MA, Mortgage Assistance Payments. For more information, see Notice 2013-7, available at www.irs.gov/irb/2013-06_IRB/ar08.html.
Do not report in box 1 of Form 1098 any interest paid by a seller on a purchaser's/borrower's mortgage, such as on a “buy-down” mortgage. For example, if a real estate developer deposits an amount in escrow and tells you to draw on that escrow account to pay interest on the borrower's mortgage, do not report in box 1 the interest received from that escrow account. Also, do not report in box 1 any lump sum paid by a real estate developer to pay interest on a purchaser's/borrower's mortgage. However, if you wish, you may use box 4 to report to the payer of record any interest paid by the seller. See Points next for information about reporting seller-paid points in box 2.
You must report certain points paid for the purchase of the payer of record's principal residence on Form 1098. You must report points if the points, plus other interest on the mortgage, are $600 or more. For example, if a borrower pays points of $300 and other mortgage interest of $300, the lender has received $600 of mortgage interest and must file Form 1098.
Report the total points on Form 1098 for the year of closing regardless of the accounting method you use to report the points as income for federal income tax purposes.
They are clearly designated on the Settlement Statement (Form HUD-1) as points; for example, “loan origination fee” (including amounts for VA and FHA loans), “loan discount,”
“discount points,” or “points.”
They are computed as a percentage of the stated principal loan amount.
They are charged under an established business practice of charging points in the area where the loan was issued and do not exceed the amount generally charged in that area.
They are paid for the acquisition of the payer of record's principal residence, and the loan is secured by that residence. You may rely on a signed written statement from the payer of record that states that the proceeds of the loan are for the purchase of the payer of record's principal residence.
They are paid directly by the payer of record. Points are paid directly if either a or b below applies.
The payer of record provides funds that were not borrowed from the lender of record for this purpose as part of the overall transaction. The funds may include down payments, escrow deposits, earnest money applied at closing, and other funds actually paid over by the payer of record at or before closing.
The seller pays points on behalf of the payer of record. Points paid by the seller to the interest recipient on behalf of the payer of record are treated as paid to the payer of record and then paid directly by the payer of record to the interest recipient.
For loans to improve a principal residence;
For loans to purchase or improve a residence that is not the payer of record's principal residence, such as a second home, vacation, investment, or trade or business property, even though the borrower may be entitled to amortize points paid for the purchase of a second home, vacation home, etc., and deduct them over the life of the loan;
For a home equity or line of credit loan, even if secured by the principal residence;
For a refinancing (but see Construction loans, below), including a loan to refinance a debt owed by the borrower under a land contract, a contract for deed, or similar forms of seller financing;
In lieu of items ordinarily stated separately on the Form HUD-1, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes; and
To acquire a principal residence to the extent the points are allocable to an amount of principal in excess of $1 million.
Are clearly designated on the loan documents as points incurred in connection with the loan, such as loan origination fees, loan discount, discount points, or points;
Are computed as a percentage of the stated principal loan amount;
Conform to an established business practice of charging points in the area where the loan is issued and do not exceed the amount generally charged in the area;
Are paid in connection with a loan incurred by the payer of record to construct (or refinance construction of) a residence that is to be used, when completed, as the principal residence of the payer of record;
Are paid directly by the payer of record; and
Are not allocable to an amount of principal in excess of $1 million.
Report prepaid interest (other than points) only in the year in which it properly accrues.
Except for amounts paid to the Department of Veterans Affairs or the Rural Housing Service, payments allocable to periods after 2007 are treated as paid in the periods to which they are allocable. Taxpayers should be referred to Publication 936 for allocation information.
You are required to report reimbursements of overpaid interest aggregating $600 or more to a payer of record on Form 1098. You are not required to report reimbursements of overpaid interest aggregating less than $600 unless you are otherwise required to file Form 1098. That is, if you did not receive at least $600 of mortgage interest during the year of reimbursement from the person to whom you made the reimbursement, you are not required to file Form 1098 merely to report a reimbursement of less than $600. However, you may report any reimbursement of overpaid interest that you are not otherwise required to report, but if you do, you are subject to the rules in these instructions.
The reimbursement must be reported on Form 1098 for the year in which the reimbursement is made. No change should be made to the prior year Form 1098 because of this reimbursement. Report the total reimbursement even if it is for overpayments made in more than 1 year.
To be reportable, the reimbursement must be a refund or credit of mortgage interest received in a prior year that was required to be reported for that prior year by any interest recipient on Form 1098. Only the person who makes the reimbursement is required to report it on Form 1098. For example, if you bought a mortgage on which interest was overpaid in a prior year, you made a reimbursement of the overpaid interest, and the previous mortgage holder was required to report mortgage interest on Form 1098 in the prior year, you must file Form 1098 to report the reimbursement because you are the one making the reimbursement.
If you are required to file Form 1098, you must provide a statement to the payer of record. For more information about the requirement to furnish a statement to the payer of record, see part M in the 2013 General Instructions for Certain Information Returns.
Enter the name, address, and telephone number of the filer of Form 1098. Use this same name and address on Form 1096.
Enter the name and address, in the appropriate boxes, of the person who paid the interest (payer of record).
The account number is required if you have multiple accounts for a payer/borrower for whom you are filing more than one Form 1098. Additionally, the IRS encourages you to designate an account number for all Forms 1098 that you file. See part L in the 2013 General Instructions for Certain Information Returns.
Enter the interest (not including points) received on the mortgage from borrowers during the calendar year. Include interest on a mortgage, a home equity loan, or a line of credit or credit card loan secured by real property. Do not include government subsidy payments, seller payments, or prepaid interest that does not meet the exception explained under Prepaid Interest earlier. Interest includes prepayment penalties and late charges unless the late charges are for a specific mortgage service.
Enter points paid on the purchase of the payer of record's principal residence. For an explanation of reportable points, see Reportable points earlier.
Enter the total refund or credit of a prior year(s) overpayment of interest. See Reimbursement of Overpaid Interest earlier.
Enter total premiums of $600 or more paid (received) in 2013, including prepaid premiums, for qualified mortgage insurance. Qualified mortgage insurance is mortgage insurance under a contract issued after December 31, 2006, and provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service (or their successor organizations), and private mortgage insurance, as defined by section 2 of the Homeowners Protection Act of 1998 (as in effect on December 20, 2006).
Receipt of $600 or more of mortgage insurance premiums is determined on a mortgage-by-mortgage basis. Do not aggregate mortgage insurance premiums received on all of the mortgages of an individual to determine whether the $600 threshold is met. You do not need to report mortgage insurance premiums of less than $600 received on a mortgage, even though you receive a total of $600 or more of mortgage insurance premiums on all of the mortgages for an individual in a calendar year.
See Prepaid Mortgage Insurance earlier for the tax treatment of prepaid mortgage insurance premiums.
Enter any other item you wish to report to the payer, such as the address of the property that secures the debt, real estate taxes, insurance, or if you are a collection agent, the name of the person for whom you collected the interest. You do not have to report to the IRS any information provided in this box.
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