Form 1098-ma

[RLymanC]

Client paid 10,848 interest payments and 1754 prop taxes on form 1098. Client paid these amounts.

Form 1098-MA Box 1 8926....Box 2 8926...Box 3 blank.

Do any adjustments have to be made on schedule A?

[S T]

Haven't come across this, but see the 1098-MA instructions and safe-harbor deduction computation.

http://www.irs.gov/pub/irs-pdf/f1098ma.pdf

See TTB pg 4-11

Also found Notice 2013-7 http://www.kpmg.com/US/en/IssuesAndI...nts/n-13-7.pdf

Hope this helps

Sandy

[JohnH]

What a timely question. I had a client on extension who brought me his info this morning, and he had a 1098-MA in his package. I did a cursory reading of the Notice 2013-7, plus the info in The Tax Book and the info accompanying the 1098-MA.

My understanding is that the taxpayer can deduct the total of the PAYMENTS made on the loan and allocate it between interest and taxes, but only up to the amount of interest and/or taxes actually paid. It treats the payments actually made by the taxpayer as being applied first toward interest and taxes and then toward principal (regardless of the timing of the payments).

For example, if the taxpayer's payment is $1,500 per month and the 1098-MA states the program made all 12 payments in the year, then the taxpayer has no deduction. But if this taxpayer made 3 payments and the program made the other 9, then the taxpayer can deduct up to $4,500 in interest and property taxes, provided the interest and property taxes exceeded $4,500. If they were on the back side of a loan and the interest and property taxes were only $4,000, the deduction would be limited to $4,000. I assume the deduction for interest and property taxes would be derived by calculating the ratio of the two.

If I'm way off base on this, someone please correct me.
Don't be shy - I'm more interested in being correct than in being right.

[appelman]

My understanding of the safe harbor is the following:

The taxpayer may deduct all the payments they have made out of pocket, up to the combined limit of deductible mortgage interest, mortgage insurance, and real estate taxes. Taxpayer may divide the payments among these deductible expenses in any way they choose. Taxpayer does NOT have to allocate any payment to mortgage principle. In determining the out-of-pocket payment, I would go by the taxpayer's records rather than the 1098-MA.

What a timely question. I had a client on extension who brought me his info this morning, and he had a 1098-MA in his package. I did a cursory reading of the Notice 2013-7, plus the info in The Tax Book and the info accompanying the 1098-MA.

My understanding is that the taxpayer can deduct the total of the PAYMENTS made on the loan and allocate it between interest and taxes, but only up to the amount of interest and/or taxes actually paid. It treats the payments actually made by the taxpayer as being applied first toward interest and taxes and then toward principal (regardless of the timing of the payments).

For example, if the taxpayer's payment is $1,500 per month and the 1098-MA states the program made all 12 payments in the year, then the taxpayer has no deduction. But if this taxpayer made 3 payments and the program made the other 9, then the taxpayer can deduct up to $4,500 in interest and property taxes, provided the interest and property taxes exceeded $4,500. If they were on the back side of a loan and the interest and property taxes were only $4,000, the deduction would be limited to $4,000. I assume the deduction for interest and property taxes would be derived by calculating the ratio of the two.

If I'm way off base on this, someone please correct me.
Don't be shy - I'm more interested in being correct than in being right.

[mactoolsix]

Since the 1098 amounts are higher, this may apply:

Safe-harbor deduction computation.
You may use a safe-harbor
method to compute your deduction for mortgage interest, mortgage
insurance premiums, and real property taxes on your main home if
you meet two tests. First, you meet the rules to deduct all of the
mortgage interest on your loan, all of the mortgage insurance
premiums, and all of the real property taxes on your main home.
Second, you participated in an HFA Hardest Hit Fund program in
which program payments could be used to pay mortgage interest or
you participated in an EHLP. If you meet these tests, then you may
deduct an amount equal to the sum of all payments you actually
made during the year to your mortgage servicer, the State HFA, or
HUD. However, the amount you may deduct cannot exceed the sum
of the amounts shown on your Form 1098, Mortgage Interest
Statement, in box 1 (Mortgage interest received from payer(s)/
borrower(s)), and any real estate taxes and mortgage insurance
premiums reported in box 4. (my emphasis)

Mike

[David1980]

Client paid 10,848 interest payments and 1754 prop taxes on form 1098. Client paid these amounts.

Form 1098-MA Box 1 8926....Box 2 8926...Box 3 blank.

Do any adjustments have to be made on schedule A?

"Client paid these amounts" - I don't think the 1098-ma will affect anything in that situation. Since under the safe harbor method they basically apply their payments to interest first they can deduct the full 1098 amounts if they made at least that much in payments on their own.

Form 1098-MA is basically saying "Hey, someone else (the state) made payments on this guys mortgage - you need to find out how much the taxpayer actually paid instead of just relying on 1098!"

If the taxpayer paid less than the 1098 amounts then they can deduct whatever they actually paid. If they made $5,000 in mortgage payments they can deduct the $5,000 not the $10,848/1754.