Begin by entering the information as though you received the 1098:
But what if the seller is NOT the mortgage lender?
For example, we financed a personal mortgage for our son, secured by his home, so we are not required to send him a 1098 as a closely related lender, but we are also not the seller. The interest he pays us should qualify him for the mortgage interest deduction, even without a 1098.
I cannot figure out how my son would enter this in TurboTax.
(I cannot check the correct box 2a on the Mortgage Interest Worksheet - "I did not receive a 1098")
Does he just pretend he has a 1098 in TurboTax with the correct numbers AS IF WE DID send him an actual 1098?
A late response. I have the exact same situation. We financed a personal mortgage for our son, secured by his home, so no Form 1098. We were not the seller. It baffles me that Turbo Tax has still not developed a screen to accommodate this. The only way for a borrower to say they did not receive a Form 1098 in Turbo Tax is if they check the button saying that the lender was the seller. Since that is not accurate, it seems like the way I will proceed is just as if the borrower did receive a Form 1098. In Turbo Tax, there is no way to do this correctly. Their software does not allow for this situation, which cannot be all that uncommon, to exist.
To make it easy for everyone, the interest and SSNs should all match up. Mortgage interest and sch B direct match.
The mortgage interest should be entered as follows:
Since you are reporting the interest on your sch B. enter:
AmyC: Thank you for your response. The inconsistency is in your item #4 under mortgage interest expense for the purchaser who is my son. I am helping him do his return on Turbo Tax. Your saying I should check the box that this is a seller financed loan and did not receive a form 1098. But it is NOT a seller financed loan as I was not the seller and had nothing to do with the seller. I simply loaned my son the funds under an executed, recorded mortgage to help him purchase his home from a third party. The Turbo Tax problem that needs to be corrected is that your screen only allows for one reason that a form 1098 was not received and that reason is if it was a seller financed loan. But that is not the only reason that a purchaser would not receive a form 1098 as in my case. The goal on my son's tax return is to get the interest expense onto the correct line 8b (not 8a) on Schedule A, Itemized Deductions. Checking the box for seller financed loan will do that but it is not an accurate description of the transaction since the lender (me) was not the seller. Thank you in advance for a further response.
Ahhh, so you made a personal loan to your son. Then, either you also have a lien on the house and the loan is secured by the house or the loan is not secured by the home. If the home does not secure the loan, the deduction is not allowed. Your story may be more complicated.
I recommend reading Publication 936, Home Mortgage Interest Deduction which states:
Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). The loan may be a mortgage to buy your home, or a second mortgage.
You can’t deduct home mortgage interest unless the following conditions are met. • You file Form 1040 or 1040-SR and itemize deductions on Schedule A (Form 1040). • The mortgage is a secured debt on a qualified home in which you have an ownership interest. Secured Debt and Qualified Home are explained later.
Amy, yes the loan is secured by a mortgage that was properly drawn up by an attorney, executed, and properly filed and recorded in the county clerk office in the county where my son lives. The mortgage debt has an amortization schedule and is paid monthly in accordance with that schedule. My son files a 1040 and itemizes his deductions on Schedule A (Itemized Deductions). He does NOT have a Form 1098 because I am the lender. Therefore, his mortgage interest expense should go on Line 8b on Schedule A, not on Line 8a. I was NOT the seller. The issue is that in Turbo Tax, it seems as though the only way to get mortgage interest expense with NO form 1098 correctly on Line 8b of Schedule A is to check the box that says that the purchase was Seller Financed, which it was not. So my question is simply, how do I do this correctly in the Turbo Tax screens.
Got it! The program versus the forms versus the tax code!
The form:
About Schedule A (Form 1040), Itemized Deductions - Internal Revenue Service
The program:
trying to figure out where to put stuff on the form. It can't go in the section for a 1098. The other section says, no 1098. If there is seller-financing, fill in.....
The IRS:
looking for somebody to be earning the interest.
When your son enters the mortgage screen, it asks 1098, seller financed or none of the above.
Select none of the above
Enter the mortgage information
Secured by property
answer points and remaining questions.
Thank you but what you suggested does not seem to work because on Turbo Tax Online (which I am using), because when you click on "None of these Apply" it takes you to a screen to fill in the mortgage detail info that says to fill in the info from your Form 1098 and then it puts the mortgage interest expense on Line 8a on Schedule A which is the line for when you have a Form 1098. As you know, there is no form 1098 in this case. Here is the screen where I can click on "None of these Apply" as you suggested:
Yes, we will need these fields completed to check what itemized deduction might apply to the interest on the mortgage.
This is the blue link for What if I don't have my 1098?
As long as the information is completed, it does not have to be from a paper form.
Box 7 would be checked on a Form 1098 if the loan is secured by a particular address, i.e. a home loan.
Thank you for your response but what you suggested does not solve the question because when I do what your suggested, Turbo Tax Online thinks that the information entered is coming from a Form 1098 which it is not. Once Turbo Tax Online thinks the info is coming from a Form 1098, it then puts the mortgage interest expense on Line 8a on Schedule A, Itemized Deductions when the interest should be on Line 8b for when no Form 1098 exists. Let me be more concise in my question:
The goal is simply to have the mortgage interest expense end up on LIne 8b (used when no form 1098 exists) on Schedule A, Itemized Deductions in the tax return. This interest should not be on Line 8a on Schedule A because that is used when there is a Form 1098 for the interest. This is a secured mortgage loan made by parents to a child for purchase of child's primary residence. The child is the purchaser and owner. The seller was a third party, not the parents. A fully executed mortgage was filed with the county clerk's office as this loan is secured by the child's primary residence. The mortgage is paid monthly in accordance with an amortization schedule. The lenders (parents) were not the sellers so this is NOT a seller financed loan. So the only question is how do I fill out the screens in Turbo Tax Online so that the result is that the mortgage interest expense ends up on Line 8b of Schedule A in the actual tax return.
I have the exact same situation, except my son is also renting out two-thirds of his home, so only one third of the mortgage interest is deductible on Schedule A. The other 2/3 is a business expense for his rental business. How does he enter that in Turbotax? (Just adjust the amount for line 8b, I assume?)
The question still applies though: How to get this entry on line 8b (i.e. no seller financed, no 1098 form).
I have not yet been able to get a satisfactory answer to our question from any Turbo Tax expert in this community forum. It seems like there may be a shortcoming in Turbo Tax whereby the software does not enable you to properly enter your information in my and possibly your specific circumstance, so that the mortgage interest expense ends up on line 8b of Schedule A in the tax return when the secured loan is not seller financed. I am still hoping to get a satisfactory answer to this question from Turbo Tax Online representatives.
Hi,
I got good news for you. I actually got it to show up on Line 8b.
When you carefully go through your input when entering your mortgage interest, you will come across a screen like this
Make sure this is checked off.
As far as the 2/3 business expense portion for his rental income, he would adjust the total figure for that amount and enter it on his Sch E.
Thank you for your response, but Yes, I was already aware that checking that box gets the interest expense onto line 8b on Schedule A in your return. However, as I stated in my prior post (please read it), my case was NOT a “seller financed loan.” The seller was an unrelated third party. The loan was from parents to son. What I am trying to find out from Turbo Tax is how do you get the mortgage interest expense onto line 8b in Schedule A of your tax return when the secured loan was from parent to son so therefore, there is NO form 1098, but it was NOT a seller financed loan. The mortgage is recorded in the county clerks office like any third party lender’s would have been. The loan is secured by the home.
The program only uses line 8b with seller financed loans, as you are aware. Line 8a holds the actual 1098 and "none of the above". Which leaves two options for your son.
1. Select none of the above, the mortgage interest goes to line 8a. The IRS may someday inquire about the interest and you provide the amortization schedule or whatever proof you have.
2. Switch to the desktop version, go into forms mode and input the mortgage interest directly on line 8b. This voids the accuracy guarantee of the program. See How do I switch from TurboTax Online to the TurboTax software?
Thank you so much for your reply. After 6-7 back and forth with several T Tax experts, your response finally addresses the problem. The most important thing here is for you to raise the issue to higher levels within Turbo Tax so that the online version can be properly updated to handle the situation where there is no form 1098 for reasons other than because it was a seller financed loan. There needs to be a button added which can be selected for this so that the mortgage interest expense ends up on line 8b of Schedule A without having to select a box that says it was seller financed. Thank you