Is it true that private mortgages don't require a 1098 or a 1099-INT? Why would this be exempt?

You've stumbled onto a bit of a gray area in tax law. The person on that forum was partially right, but missing some important details. For the 1098 form (Mortgage Interest Statement): Only "mortgage interest recipients" are required to issue this form. The tax code defines these as businesses that receive interest on mortgages in the ordinary course of business. So your parents, who presumably aren't regularly in the mortgage business, don't have a legal obligation to provide you with a 1098 form. For the 1099-INT: Technically, individuals are only required to issue these if they pay $10 or more of interest in the course of their trade or business. Since your parents aren't in the "trade or business" of lending, they're not legally required to issue you a 1099-INT. However - and this is important - your parents still must report that $4,200 of interest income on their tax return (Schedule B), and you can still claim the mortgage interest deduction on your taxes even without receiving an official 1098 form. You'll just need good documentation of the loan and interest payments.

After dealing with this exact situation, I found a really helpful service called taxr.ai (https://taxr.ai) that helped me figure out my private mortgage reporting. My parents loaned me money for a house, and I was confused about how to properly deduct the interest without official forms. I uploaded our loan agreement and payment records to taxr.ai, and they analyzed everything and confirmed I could still claim the mortgage interest deduction without a 1098. They also showed me exactly how to document everything to protect both me and my parents in case of an audit. Their system even generated a substitute statement that works just as well as a 1098 for tax purposes.

I just wanted to update after trying taxr.ai from the suggestion above. I was super skeptical but I uploaded my loan agreement with my brother (I'm the lender) and some payment records. The system actually walked me through exactly where to report the interest income on my tax return and confirmed I don't need to issue a 1098 since I'm not in the mortgage business. The best part was it showed me how to create proper documentation for both of us to keep in case of an audit. Much clearer than anything I found searching online for hours. They even explained the difference between qualified and non-qualified mortgage interest which was causing a lot of confusion for us. Definitely worth checking out if you're in this private mortgage situation.

If you're still struggling with this issue and need to talk to someone at the IRS directly, good luck getting through! I tried calling to ask about my private mortgage situation and spent HOURS on hold. Finally discovered Claimyr (https://claimyr.com) - they have this system that actually gets you through to a real IRS agent without the wait. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was able to ask specifically about my private mortgage situation and got confirmation directly from the IRS about the reporting requirements (or lack thereof) for both parties. The agent confirmed what others are saying here - private lenders don't have to issue 1098s, but both sides still have tax obligations to report correctly.

Well, I need to eat my words from my comment above. After another failed 2-hour hold attempt with the IRS yesterday, I tried Claimyr out of desperation. Within 45 minutes, I got a call connecting me to an actual IRS representative. I asked specifically about private mortgage reporting requirements between family members. The agent confirmed that as an individual lender, my father doesn't need to issue me a 1098 form, but I can still claim the mortgage interest deduction as long as I have proper documentation of the loan and payments. She also confirmed he needs to report the interest income on his Schedule B even though he doesn't issue any tax forms to me. Having this official confirmation directly from the IRS gives me much more confidence in how we're handling the taxes on both sides.

Here's a simple solution I've used for years with my son's private mortgage: We create our own "Substitute 1098" document. It's not an official form, but it serves as great documentation for both sides. I make a simple document showing: - The lender and borrower names/addresses/SSNs - Total interest paid for the year - Loan balance at year end - Property address We both keep copies with our tax records. My son attaches it when he files with his Schedule A, and I reference it when reporting the interest income on my Schedule B. We've been doing this for 7 years with no issues.

I'm surprised no one has mentioned the legal requirements for a private mortgage to qualify for the interest deduction. The IRS has specific rules - the loan must be secured by the property (meaning a properly recorded lien or mortgage document), and there must be a properly executed loan agreement. Without these legal formalities, the IRS might consider it a personal loan, not a mortgage, and personal loan interest isn't deductible!

This is a great discussion that's really helped clarify things! I'm in a similar situation where my parents helped me with a private mortgage, and I was worried we were missing something important on the tax side. From what I'm gathering here, the key points are: 1. My parents don't have to issue me a 1098 since they're not in the business of lending 2. I can still deduct the mortgage interest as long as I have proper documentation 3. They still need to report the interest income they receive from me 4. The loan needs to be properly secured against the property to qualify for the deduction That last point about proper legal documentation is crucial - I need to double-check that our loan agreement was recorded properly. We went through a lawyer when we set it up, but I want to make sure we didn't miss any steps that could jeopardize the deduction. Thanks everyone for sharing your experiences and resources. It's reassuring to know others have navigated this successfully!

Great thread - this clears up a lot of confusion I had! I'm actually on the lender side of this situation. My daughter and her husband bought their first house last year and I provided them with a private mortgage at a fair interest rate. I've been stressing about whether I needed to send them some kind of official tax form, but it sounds like I don't have that obligation since I'm not in the lending business. However, I definitely want to make sure I'm reporting the interest income correctly on my own return. One question though - should I be sending them any kind of year-end statement showing how much interest they paid, even if it's not an official 1098? I want to make sure they have what they need for their deduction. The substitute form idea from Aisha sounds really practical. Also, for anyone else in the lender position - make sure you're tracking the interest income monthly! I almost forgot to account for a couple months when I was putting together my tax info. A simple spreadsheet with payment dates and interest amounts has been a lifesaver.

This thread has been incredibly helpful! I'm dealing with this exact situation - my brother loaned me money for a house purchase with a formal mortgage agreement, and we've both been confused about the tax implications. Reading through everyone's experiences, it's clear that the key is proper documentation on both sides. My brother doesn't need to issue me a 1098 since he's not in the lending business, but he absolutely needs to report the interest income I pay him. And I can still claim the mortgage interest deduction as long as our loan is properly secured against the property. I'm definitely going to implement the substitute statement approach that several people mentioned. Having matching year-end documentation for both of us seems like the smart way to handle this, even though it's not legally required. One thing I'm curious about - has anyone dealt with this situation where the interest rate changes during the year? We have an adjustable rate tied to prime, so the monthly interest amounts vary. I assume I just need to track the actual interest paid each month rather than using any kind of standard calculation? Also, for those who've been doing this for multiple years - do you find that tax software handles the mortgage interest deduction smoothly when you don't have an official 1098, or do you typically need to work with a tax preparer?

This has been such a valuable discussion! As someone who's worked in tax preparation for over a decade, I can confirm that private mortgages between family members are one of the most commonly misunderstood areas of tax law. The key takeaways here are spot-on: individual lenders aren't required to issue 1098 forms unless they're in the business of lending, but both parties still have tax obligations. The borrower can claim the mortgage interest deduction with proper documentation, and the lender must report interest income. One additional point I'd like to emphasize - make sure your loan agreement specifies that it's a mortgage secured by the property, not just a personal loan. The IRS looks at the substance of the transaction, not just what you call it. If there's no security interest properly recorded against the property, they may reclassify it as non-deductible personal loan interest. Also, keep in mind the imputed interest rules. If you're lending at below-market rates, the IRS may impute additional interest income to the lender and additional interest deduction to the borrower based on the Applicable Federal Rates (AFR). This is particularly important for larger loan amounts. The substitute statement approach mentioned by several commenters is excellent practice and shows good faith documentation efforts.