Feb 13, 2008

Reporting Mortgage Interest--As the Lender

QUESTION: I lent my daughter and son in-law money in the form of a second mortgage. At the end of the year, I sent them a statement showing the amount of interest paid, the amount of principal paid and the remaining balance. My understanding is that I am not required to file a 1098. Do I need to provide any additional information to them?

Second question: How and where do I report the interest income I am receiving from the loan?

ANSWER: You did exactly the correct thing in providing them with a written statement of interest paid for the year. No Form 1098 is required in this circumstance. On your daughter and son-in-law's tax return, they will have report the interest paid to you on Schedule A and list your name, address, social security number, and amount of interest paid in lieu of receiving a Form 1098.
As for your question about reporting the interest income received, you will report that amount on Schedule B of your tax return under Interest Income.

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