Mortgage interest deduction

[bobleahy04]

I'm buying a home on contract so my mortgage isn't from a bank. The interest was calculated and figured in to the monthly payment when the contract was drawn up. I won't get a 1098 form, can I still claim this deduction?

[jtax · Accepted solution]

It doesn't have to be a bank and you don't need to get a 1098.

The requirements are that you own the real estate, that the loan is secured by the property, and that it is qualified debt.

See IRS Pub 936 https://www.irs.gov/publications/p936/ar02.html#en_US_2016_publink1000229894

which says in part:

Secured Debt

You can deduct your home mortgage interest only if your mortgage is a secured debt. A secured debt is one in which you sign an instrument (such as a mortgage, deed of trust, or land contract) that:

• Makes your ownership in a qualified home security for payment of the debt,

• Provides, in case of default, that your home could satisfy the debt, and

• Is recorded or is otherwise perfected under any state or local law that applies.

In other words, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. If you cannot pay the debt, your home can then serve as payment to the lender to satisfy (pay) the debt. In this publication, mortgage will refer to secured debt.