Question

Mortgage Interest Payment on Seller Finance

Forum|Forum|1 year ago
February 19, 2025
2 replies
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Hello,

I purchased a home in September 2024 through seller financing. Although we went through an escrow company and the deed is in my name, I haven’t received any official bank documentation (like Form 1098) because it’s seller-financed. How should I go about deducting or writing off the mortgage interest I’ve paid, and what documentation should I keep for tax purposes?

Ask the Experts - Deciphering - Feb 2025

M

MAK70

In TurboTax, you can indicate that you did not receive a 1098 and enter the needed information (see below). For records, you will want to keep copies of any agreements including sale documents and track all payments with interest and principal.

If you need to calculate the interest, use something like Interest Calculator and once again, keep copies with your records.

M

Mike9241

to be deductible as mortgage interest the property must be security for the seller-financed mortgage.

since no 1098 has been provided, the instructions for a schedule A mortgage deduction with no 1098 require the seller's name, tax ID number, and current address.

another issue you face is the amount of interest paid. The IRS will match this to what the seller reported. if they don't match expect issues with the IRS. if you can't provide the required info, expect the IRS to deny the deduction or send you a letter requesting the missing info. you will also need to complete the Home Mortgage Interest worksheet in Turbotax if the mortgage exceeds the allowable maximum of $750K