Question

No Form 1098 for mortgage secured through parents

Forum|Forum|4 years ago
February 27, 2022
1 reply
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My wife and I closed on a home in December of 2020, but didn't make our first mortgage payment until January of 2021. The home was purchased via a legal, secured loan from my parents (my parents acting as the bank). They didn't provide us a 1098 last year, but since we didn't make any mortgage payments until 2021, we reported it in 2020 (completed boxes 2 and 3 with outstanding mortgage principal and origination date) but didn't claim any mortgage interest paid.

How should we handle the 1098 for 2021? It's easy enough to complete the info needed for the deduction using our amortization schedule, but should my parents complete Form 1098 and send to us for official documentation? The loan is clean and we don't pay PMI or have any points paid, so boxes 4-6 wouldn't apply.

ColeenD3

Your parents do not need to send you a Form 1098. This is considered to be a seller-financed mortgage.

Please follow the instructions below:

Click Federal Taxes
Click Wages & Income
Scroll down to Interest & Dividends
Click Start next to Interest from Seller-Financed Loans
Answer Yes to Did you receive interest payments from a seller-financed mortgage?
Proceed through the rest of the interview to enter your mortgage interest

M

Michael16Author

From the buyer's (my) standpoint, should I report the interest paid on the secured loan as though I have a 1098? In other words, should I go ahead and complete the information I would've received form the 1098 (mortgage interest, outstanding mortgage principal, etc.) in TurboTax for the mortgage interest deduction?

Carl11_2

Employee

should I report the interest paid on the secured loan as though I have a 1098?

Yes. The lender (parents) will probably need to provide you their SSN so you can correctly report what/who the interest was paid to. This is necessary so the IRS can confirm the recipient of the interest reports it as income to them.