I got a 1099-Misc from my mortgage loan bank that list as other income the credit they gave me for closing costs. I was the buyer. Is this taxable?

[edavance]

The mortgage loan credit was used for closing costs.

[Leonard · Accepted solution]

No, it is not taxable.

The credit you received from the bank was a return of excess payments that you made at closing.

[edavance]

Thank you.

[Leonard]

You are welcome

[alfonza-brown]

Hi Leonard, I would like further clarification. So, we do not have to report credits that they gave us, even though they applied the credit during the closing?

[kujo2653]

I also recieved one for the same reason. However, the 1099-Misc is submitted to the IRS. How do you correct this to avoid paying taxes for this sum? It should show that I'm missing a 1099-MISC reporting if I tried to just file without it.

[yellow dog]

I also received a 1099-Misc from mortgage lender that lists other income.  Is there a solution to this issue?

[DaveF1006]

It depends. Normally closing costs are added to the basis of your house to determine capital gains when you sell the house. Capital gains are the difference between your basis and your proceeds received upon the sale of your house. If you received a check for the closing costs, this is an economic benefit to you and is taxable income. in return, your closing costs, with the exception of mortgage interest and property taxes can be added to the basis of your house to lessen your capital gains when you decide to sell your house. Your mortgage interest and property taxes can be deducted this year providing you can itemize your deductions this year.

[yellow dog]

Hi Dave,

I was the buyer of the house.  I paid closing costs in addition to the purchase price of the home.  

The 1099-MISC specifies other income of $752.  How could I accumulate income by purchasing a home and paying closing costs?

[ReneeM7122]

You didn't accumulate income by purchasing a home and paying closing costs, but if the bank gave you a credit somehow then they are saying that it was a benefit to you that is taxable (which you can add to the basis of your home later).  We would respectfully suggest calling the lender to ask them why the interpreted it as such.

@yellow dog

[TaxesRTheft]

"If you received a check for the closing costs, this is an economic benefit to you and is taxable income." 

This is equivalent to saying that if you purchased something on sale instead of paying full retail price that the difference in sale price and full retail price should be reported to you on a 1099-Misc.   Furthermore, since the gain on your personal residence is, for the most part, exempt from tax, the fact that you can add this extra amount to the basis will make ZERO difference in your taxable income, so, in reality, it served no economic benefit.  Also, since the standard deduction has been increased to include what used to be personal exemptions, many people (if not most) no longer itemize even if they paid mortgage interest and property taxes.  There is no taxable benefit to having a mortgage for the "average" taxpayer.  

The amount reported on 1099-Misc by the mortgage company should not have to be reported as taxable income to most taxpayers because they were probably not able to deduct the interest or property tax to begin with.  So, the question has still not been answered.  One cannot just ignore the amount and not include it as income on the tax return (because it's been reported to IRS,) but one should also not have to report it has income since it is NOT INCOME.  Where can the taxpayer deduct the amount where it actually makes a difference in their taxable income; not on Schedule A because they will probably not have enough to itemize.