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TT Community says cash system users cannot deduct "previously deferred interest". Is the deferred interest expensed when the lump sum at end of mortgage gets paid (Covid-19 Forbearance) ?
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Yes, you can deduct the interest when you pay it at the end of a mortgage.
Yes, you can deduct the interest when you pay it at the end of a mortgage.
Thank you
I have spent hours with bank with no answers and see no relevant examples in my IRS publications regarding the 1098 "previously deducted interest". I figured I would have to visit a tax attorney.
For the covid forebearance I was told that the payments (principal and interest) would be saved at the end of the mortgage with no accrual of additional interest. But no one at the bank can explain how the "previously deferred interest" (pdi) is calculated or if it could be deducted on the year of the 1098. I was concerned that not deducting the pdi might "lose" deducting it later.
Do you know how "previously deferred interest" is calculated?
I have requested payment history to check that there is no negative amortization.
When I pay the interest at the end of the loan or when I sell, will my 1098 show the interest I pay that year or in some way be affected by the "previously deferred interest" of previous 1098s?
Mathematically, will all the PDI amounts equal the interest due at the end of the loan?
Obviously confused but very appreciative that an expert answered so soon that I do indeed just deduct what I pay each year using cash basis and will be able to deduct the interest I pay at the end of the loan.
Thank you again
Sorry Robert,
Working very late, and see I wrote
previously deducted ....
obviously, meant previously deferred
Previously deferred interest is the interest that would have been forgiven if you had paid off the loan by a certain date. Once that promotional period is over then the interest just gets added back into your bill. Previously deferred interest is just interest once you pay it and is reported on your 1098 the exact same way.
To calculate it you need to know how long the promotional period was. Then you take the annual percentage rate for the interest and divide it by 365 (or 366 if it was a leap year). Then take that daily rate and calculate out what the interest was for the promotional period. If it was six months then figure on the number of days in that six months. And so on.
So hoping you can help! Unfortunately, very long story, but basically, my daughter took out a HELOC for $45K to pay off credit cards and to purchase used car. She did not sell her home. When they went to settlement, the lender hid the fact that she had to pay back the Covid forbearance ALONG with the First Time Homebuyers help, even though she did not sell her home - still lives there - just was taking out a loan. So instead of getting $40K, she only received $6K It's been a nightmare, but basically can she deduct anything on her 2024 taxes with regards to paying off these? Thank you in advance for your time. Debbie
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