Deferred Mortgage Interest

[WhiteOleander]

Anyone have any info on deducting deferred mortgage interest? I can't find anything in the Pub etc.
Thanks

[Nashville]

Not a Deduction

Oleander, if I understand it correctly, "deferred" interest is interest which has been recognized and accumulated into the debt but not paid.

Interest must be "paid" to be deducted. I believe this to be true even for accrual-based taxpayers.

I hope I understood your question.

[WhiteOleander]

Yes, this is how I thought about it too. But, t/p says it is added to the principal, so since he will have to pay it, he should be able to deduct it.

[Nashville]

He is correct, but

Since he WILL pay it, he WILL deduct it, in whatever year he pays it.

Ask him if he objects to showing income on money he WILL receive but hasn't received yet...that should stop the whining...

[WhiteOleander]

Thanks,
So, the mortgage company will show what portion of deferred interest he has paid each year?

[Nashville]

Form 1098

I believe the 1098 should show the total interest paid, whether deferred previously or not. Some mortgage statements can be more sophisticated, but I believe their requirement would be simply to show the total interest paid on the 1098, regardless of the nature or timing of interest.

I've seen a couple 1099-Cs this year where all sorts of interest has been charged to the borrower, but the same mortgage company will also issue a 1098 to the same person with little or no interest actually paid.

[JON]

The mortgage company

better keep tract. It will be interesting, hopefully computers have made it easy.