No, you do not send a 1098. You can use an amortization schedule which you both should have or just communicate the amount between yourselves so that both of you report the same amount.
If you received
interest from someone either as mortgage interest or other interest, enter it
like you had received a 1099-INT and put the amount in Box 1. Enter
it under….
Federal Taxes Tab
Wages & Income
Choose Explore on my own or I'll choose what
to work on (if it comes up)
Interest and Dividends
Interest on 1099INT - Click the Start or
Update button
Specifically, I loaned my relative to buy a house, they pay me principal and interest every month. I understand I don't need to send them form 1098, because this is a personal loan, not "in the course of (my) trade or business". I think I should send them 1098 anyway, because that may be easiest way for us both. Where to claim that interest income in TurboTax Deluxe? Thanks.
No, you do not send a 1098. You can use an amortization schedule which you both should have or just communicate the amount between yourselves so that both of you report the same amount.
If you received
interest from someone either as mortgage interest or other interest, enter it
like you had received a 1099-INT and put the amount in Box 1. Enter
it under….
Federal Taxes Tab
Wages & Income
Choose Explore on my own or I'll choose what
to work on (if it comes up)
Interest and Dividends
Interest on 1099INT - Click the Start or
Update button
Answers I've seen in the community all seem to fall short. Pretending to have a 1099-INT would seem to open you to audit questions. Meantime delivering a 1098 to the loanee and to the IRS seems the right way to declare the interest collected. Where to record that interest income is still up in the air and looks like a hole in TurboTax.
jpinter has a point .... so let me add to my answer.
If you are not in the business of loaning money like a bank then you do not need to send the payer a 1098 per the IRS regs on that subject. Instead the payer will report the mortgage interest paid by entering the name, address & tax number of who they pay on the Sch A and the holder of the mortgage will report the name , address & tax number of the payer on the Sch B so they cross reference each other.
See the screen shots ...
Thank you very much Critter#2 for the detailed answer and screen shots! Very helpful. 🙂
Yes - thanks to Critter#2. Using entries in Schedule B as "Seller-Financed" gave exactly the same result as adding bogus 1099-INT forms. Only question is how this squares with the IRS in a case where one is NOT financing the sale of his own home, just floating a mortgage loan. Any comments appreciated.
Same thing. It is a loan you are getting interest on reported on a Sch B.
Not it isn't. It is not a "Seller Financed Loan", it's a private loan.
Where do I claim interest received from a private mortgage loan *NOT by seller* backed by Deed of Trust?
For the borrower, it is quite straight forward, enter the amount paid on line 11 of Schedule A.
But for the lender it is extremely unclear.
IRS instructions, e.g. Publication 936, only covers *Seller Financed Loans*, not private loans.
In that case, it would go on schedule B - but that's NOT the case, this is NOT a Seller Financed loan, it's a private loan.
It would be easy if lender sent borrower a 1098, but they are not supposed to do that unless they are "in the business", which is NOT the case..
The only place left is 1040 line 21 "other income", but the description of items for those lines doesn't fit this situation.
I spent hours searching, with no answer. It seems this situation isn't that uncommon, there should be a clear guideline from IRS what to do, but I haven't found it.
If it is not a seller financed loan then enter it as plain income like from a bank .... either Sch B entries will suffice since both will put it on the Sch B with the exact same result. Interest income is interest income and you do not need to send a 1098 to report it on your return. Putting it on line 21 could produce an IRS letter for an explanation ... putting it on the Sch B will not.
Thank you! I entered it using TurboTax 1099-INT dialog. While the borrower didn't send me a 1099, that appears the easiest way to get it on Sch B using TurboTax application. Borrower entered it on Sch A line 11. Neither of us entered Tax ID #s for the other, just names. I couldn't find guidance from IRS on TID requirements for private loans.
Also noting, while it is a private loan, it can also be categorized as a mortgage loan, as it is backed by Deed of Trust. That makes a difference to the borrower, but I don't see specific IRS guidance about how lender should treat it, so the default appears to be simple interest received.
If the other person entered it as mortgage interest on the Sch A then you really should enter as a seller financed loan if for nothing else than to have the information line up ... however it will all come out in the wash.
Thanks again, Critter#2. That is the frustrating part, it is NOT a "seller financed loan", it is a private loan. However it is also a mortgage loan, as it's backed up by Promissory Note / Deed of Trust, so borrower needs to report it as mortgage interest paid, on Sch A line 11 (no 1098 received). Now, best thing seems to be I claim on Sch B as interest received, and state the borrower Name and TID (SS) #, IRS can match it up. I wish I could find an official IRS statement that clarified this situation.
You are really splitting hairs ... either kind of interest is reported the exact same way on the Sch B with the name of the payer and the amount. Don't worry so much, to the IRS income is income and they are just happy you report it.
I suppose.. but if claimed as "Seller Financed Loan" implies I sold a property (I did NOT) and IRS may wonder why that doesn't showing up on my tax forms? I don't want to file something that indicates I made some financial transaction that I didn't. I still wish I could find an official IRS statement that clarified this situation, but I think that simply claiming it on Sch B as interest income and identifying the borrower should be sufficient and not raise any IRS questions. Hopefully.
I am doing my first WRAP mortgage interest income through my LLC. (The seller extends to the buyer a junior mortgage which wraps around and exists in addition to any superior mortgages already secured by the property)
My note servicing company issued 1099 INT which indicates interest income ($8K) which is higher than the actual interest income ($2K) received from the end buyer. It seems like note servicing company is most likely reporting underlying mortgage interest income ($6K).
How do I report actual interest income ($2K) under Interest income? In other words, where can I deduct underlying mortgage interest income ( as an expense)?
Thank you in advance for your help.
I understand that it is not necessary to give the payee a 1098, but is this a Capital Gain asset for me under Rev. Rule 64=162 since I am reporting the interest and principal pay back over 25 years?
.
An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. You can read more about installment sales here.
You can report part of your gain when you receive each payment, rather than all of your gain in the year of the sale.
Here’s how to report one in TurboTax:
Here's more info on Form 6562.
I have read all of the repy's and still don't have a straight answer. If a Property Investor finances a mortgage loan for an LLC who is also a Property Investor, what does the Interest get reported on......1098 or 1099 Int.?? And if not either one of these..... then what?
Thank you in advance,
The LLC, which pays the interest, would file Form 1099-INT showing the interest they paid.
The LLC most likely claimed the interest as an expense.
The IRS wants forms filed that alert them of INCOME they should see reported on a tax return. When the LLC files Form 1099-INT, that form is letting the IRS know that the "Property Investor" should be reporting that amount as income for the same tax year.
The Property Investor will claim the interest on Schedule B.
Unless the LLC is a Sole Proprietorship, the Property Investor needn't file Form 1098.
According to the IRS:
FORM 1099-INT "File Form 1099-INT, Interest Income, for each person:
To whom you paid amounts reportable in boxes 1, 3, or 8 of at least $10 (or at least $600 of interest paid in the course of your trade or business described in the instructions for Box 1. Interest Income , later);
For whom you withheld and paid any foreign tax on interest; or
From whom you withheld (and did not refund) any federal income tax under the backup withholding rules regardless of the amount of the payment."
FORM 1098 "You need not file Form 1098 for interest received from a corporation, partnership, trust, estate, association, or company (other than a sole proprietor) even if an individual is a co-borrower and all the trustees, beneficiaries, partners, members, or shareholders of the payer of record are individuals."
"Interest income must be documented on Schedule B of IRS Form 1040."