Reporting mortgage interest when amount is below the Form 1098 reporting threshold

Forum|Forum|3 years ago
March 10, 2023
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I am looking for instructions on how to report mortgage interest when the lender has not provided a Form 1098. In this situation, the amount of interest is under the IRS reporting threshold.

The EasyStep instructions for mortgage interest appear to assume a 1098, and the various questions don’t allow for its legitimate absence. If all the information on the 1098 is not provided, there are error messages. If I fill in the information the lender provides, TurboTax then shows the amount on the Home Mortgage Interest worksheet with an X in the box for a 1098, and the amount is shown on line 8a of Schedule A. The IRS says that home mortgage interest not reported on Form 1098 should be reported on line 8b.

Looking at my tax return for 2021, I see the unreported mortgage interest on Schedule A line 8b. I don’t recall how the EasyStep questions were structured that year. I was able to enter this year’s unreported mortgage interest on the Schedule A line 8b without overriding anything. Is this the recommended solution to my problem? If so, why doesn’t TurboTax provide clearer instructions?

ErnieS0

I don’t have a Mac. My mortgage interest in PC transfers to Schedule A, line 8b when I enter mortgage interest on the screen “Do any of these situations apply?” and select This is a seller-financed load and I did not receive a 1098.

Try entering your info directly in Forms mode (top left corner button).

Once Forms opens, find Schedule A. Click on line 8b and tap the magnifying glass to open the Home Int Wkst and enter your info there.

Once you are done, tap the EasyStep button where Forms used to be to get back to the interview mode.

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CK_VAAuthor

I really appreciate the thoughtful response to my question and hearing from a human and not a bot. The response suggested one work-around for my problem of using EasyStep to report mortgage interest where there is no 1098. Unfortunately, the suggestion leads to other problems. The situation I face is NOT a seller-financed mortgage. The lender had regularly provided a 1098 until tax year 2021 when the interest fell below the IRS reporting threshold of $600. The interest for 2022 is still below the threshold so the lender again did not provide a 1098. Reporting it on Schedule A as seller-financed with the name of the lender could lead to unnecessary work for the IRS if it followed up with the lender.

I solved my problem by deleting the entry In EasyStep for the lender with the missing 1098 and then going to Forms. I found Schedule A and entered the mortgage interest on line 8b without providing the name of the lender. The name is optional if the mortgage is not seller-financed. This is the same thing TurboTax did for the 2021 taxes. I expect that the IRS software can ignore interest that is under its reporting threshold.

What really needs to happen is for TurboTax to add another question to the Home Mortgage section of EasyStep. It could simply ask whether a missing 1098 is due to the interest being below the IRS reporting threshold. It may be too late for this tax season, but it should be done for next year. Another approach (that could work for this year??) would be to add a pop-up to a missing 1098 question that directed the user to go to Forms and Schedule A to add the interest on line 8b.