joanmcq Posted February 16, 2014 Report Share Posted February 16, 2014 First client with one of these forms. Is it a reduction of mortgage interest or other income? I don't see a spot for entering in ATX in either place. Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted February 16, 2014 Report Share Posted February 16, 2014 First client with one of these forms. Is it a reduction of mortgage interest or other income? I don't see a spot for entering in ATX in either place. Joan the 1098MA is for information only. If your client can itemize they can deduct mortgage interest up to the amount reported on 1098. This form is for payments made for them by HUD. Normally if your mortgage payments were paid by an assistance program then none if the interest is deductible. Please excuse typos as I am replying on my IPhone. Quote Link to comment Share on other sites More sharing options...
David1980 Posted February 16, 2014 Report Share Posted February 16, 2014 Ultimately what the safe harbor provision for 1098-MA comes down to, is you can't deduct more than you paid. If I make mortgage payments of $500/month and at the end of the year receive a 1098 showing $10,000 of mortgage interest and also a 1098-MA showing $7,000 the safe harbor provision permits me to deduct $6,000 of mortgage interest (and taxes and ... limit $6,000 total for everything). The total of the payments I actually made. Without the safe harbor provision you would probably have to figure out of the $6,000 paid by the taxpayer how much actually was applied to principal vs. interest and deduct a smaller number. So the safe harbor provision lets you apply all of the taxpayer's payments to mortgage interest and none to principal and deduct the smaller of what the taxpayer payments are or the amount showing on 1098. 1 Quote Link to comment Share on other sites More sharing options...
joanmcq Posted February 17, 2014 Author Report Share Posted February 17, 2014 Thank you. The MA has $6600 of mortgage assistance & interest on the 1098 is $7700. Off hand I can't remember the taxes. So I can deduct a max of $6000 interest & taxes. Quote Link to comment Share on other sites More sharing options...
David1980 Posted February 17, 2014 Report Share Posted February 17, 2014 Thank you. The MA has $6600 of mortgage assistance & interest on the 1098 is $7700. Off hand I can't remember the taxes. So I can deduct a max of $6000 interest & taxes. Assuming $6,000 is the amount of payments the taxpayer actually made at least. I used $500/month = $6000 a year in my example. Obviously if they made a different payment amount or didn't make a payment in all months they'll end up with a different amount. Quote Link to comment Share on other sites More sharing options...
joanmcq Posted February 18, 2014 Author Report Share Posted February 18, 2014 I have on the 1098 the amount that was applied to principal; total of 10,701.76 paid to the bank. So I subtract the amount of mortgage assistance & come up with the remaining as deductible interest? Or prorate between interest & principal? Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted February 18, 2014 Report Share Posted February 18, 2014 Joan, Try this to see if it helps. http://www.hhfri.org/uploadedFiles/HHFRI/Home_Page/Mortgage%20Assistance%20Payments%20Form%201098-MA.pdf Quote Link to comment Share on other sites More sharing options...
David1980 Posted February 18, 2014 Report Share Posted February 18, 2014 I have on the 1098 the amount that was applied to principal; total of 10,701.76 paid to the bank. So I subtract the amount of mortgage assistance & come up with the remaining as deductible interest? Or prorate between interest & principal? You need more information than what is on the forms themselves. Because form 1098 doesn't include mortgage payments applied to principal you can't just subtract 1098-MA from 1098. The 1098 shows $10,701 of mortgage interest. Say the 1098-MA shows $5,000 payments. Does that mean that only $5,701 of mortgage interest was paid by the taxpayer? No, probably not, because there's probably some of the payments (both taxpayer and gov) applied to principal as well. The total payments could have been $15,701 instead of $10,701 in which case the taxpayer could deduct the full $10,701 of mortgage interest assuming they paid $10,701 and the government paid $5,000 of their payments. If you look at Terry D's link, what you need to find out is item #3 "Homeowner Mortgage Payments".What the homeowner actually paid. You could ask the taxpayer how much they actually paid, look at cancelled checks or bank statements, etc... but you need something that isn't reported on 1098 or 1098-MA. Quote Link to comment Share on other sites More sharing options...
joanmcq Posted February 18, 2014 Author Report Share Posted February 18, 2014 The 1098 does show how much was applied to principal. $7770 is the amount of mortgage interest paid, $2600 or so to principal. Wells Fargo is nice like that- for a mortgage, they always also list beginning balance of the mortgage, amount paid to principal, and ending balance. I'll check out the link too. Quote Link to comment Share on other sites More sharing options...
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