Land Contract Interest Paid to Family Member

[bailey1142]

My husband and I purchased our home from his grandmother via land contract in Wisconsin this year. She, or rather the trust set up by her and her late husband, is acting as the lender in this land contract, so we have been making monthly payments to her with interest. 

Do I need to give her a 1099INT?

If yes, can I do this myself or do I need to hire someone?

If no, what do I provide her instead? I was thinking a summary of the monthly payments with a breakdown of total int. and princ. in case either party can use them on our tax return. 

I would really appreciate help with these questions and navigating this situation to get our taxes done correctly! 

Thank you!

[MaryK4 · Accepted solution]

No, you are not required to issue a 1099-INT to the trust.  Because this is a mortgage between two entities that are not in the business of financing mortgages, neither you or she are REQUIRED to provide the IRS with informational forms.  

If you decided you want to file with the IRS, it would be more appropriate for the trust to file a 1098 issued to you.

However, you can enter in TurboTax to report on your individual tax return if you are itemizing deductions:

1. Under Federal Taxes, select Deductions & Credits
2. Go to Mortgage Interest and Refinancing (Form 1098)
3. Click on Add a 1098.
4. On the Let's Import your tax info screen, click on the Change how I enter my form
5. On the How would you like to upload your 1098? click on the Type it in myself box on the bottom.
6. Enter the Trust as the Lender's Name
7. On the Do any uncommon situations apply? select The seller is financing this loan and I didn't receive a 1098.
8. On the next page you can enter the Address and Tax ID Number for the Trust
9. Continue with the rest of the information.

Be sure that either you or the Trust prepares, and you both have a copy of the Interest Paid for the the Year and the Outstanding Balance so it matches if the IRS asks.