Form 1098 - Mortgage Interest on Rental Propery

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Question:

The IRS Publication on Form 1098 is very vague. Should the bank be sending out a 1098 for mortgage interest on rental property that is financed? John Doe financed a rent house and now rents to Frank Doe. Does the bank need to send John Doe the interest paid on a 1098 form at year end?

Answer:

The use of the real estate is immaterial to the need to send a 1098. The trigger for 1098 reporting is any loan secured by any real estate, if the primary obligor is an individual and at least $600 in interest payments are received in the year. The fact that the property is rented doesn't matter. In fact, the property could be commercial real estate and the loan could be a commercial time note if a mortgage on the real estate is taken as security, as long as the primary obligor on the note is an individual.

First published on BankersOnline.com 2/05/07