Missing Prepaid Interest on Form 1098 Mortgage Interest Statement - What to Do?
I purchased a home earlier this year and got my mortgage through a small local credit union. During closing, I paid about $520 in prepaid interest for the partial first month (from January 15th to February 1st). Here's where it gets complicated - the credit union ended up selling my loan to Chase after closing. My first payment to Chase wasn't due until March 1st. I just received my Form 1098 from Chase, but I've noticed it DOESN'T include that prepaid interest amount from closing. I've double-checked all my payment records and statements, and that $520 is definitely missing from the total interest reported on the 1098. Should I be expecting a separate Form 1098 from the original credit union that covers just that prepaid interest amount? Or do I need to somehow deduct the $520 separately when filing? I don't want to miss out on claiming that interest deduction!
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Henrietta Beasley
That prepaid interest at closing is definitely deductible mortgage interest! The issue is which financial institution is responsible for reporting it on Form 1098. In your situation, since the credit union received that prepaid interest at closing (before they sold the loan), they should be the ones issuing a Form 1098 for that amount. The new loan servicer (Chase) would only report interest they actually received from you after they acquired the loan. I'd recommend contacting the credit union directly and asking about the Form 1098 for that prepaid interest. They might have overlooked it since the loan was sold, or they might issue a 1098 for just that amount. Financial institutions are required to issue 1098s if the interest paid was $600 or more, but since your amount is under that threshold, they might not automatically send one. Even if you don't receive a Form 1098 for it, you can still deduct that prepaid interest as qualified mortgage interest on Schedule A if you itemize deductions. Just be sure to keep your closing documents as proof in case of an audit.
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Lincoln Ramiro
•What if the credit union doesn't issue a 1098 since it's under $600? Do I just add it to the amount on the Chase 1098 when entering it in my tax software, or do I need to enter it separately somewhere else?
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Henrietta Beasley
•If the credit union doesn't issue a 1098 because the amount is under $600, you can still claim it as mortgage interest when you itemize. You don't add it to the Chase 1098 amount in your tax software - that would make their reported amount incorrect if the IRS compares records. Instead, enter the Chase 1098 information as reported, then most tax software will have a section for "mortgage interest paid but not reported on Form 1098" where you can enter the additional $520. Keep your closing documents showing this prepaid interest as support for your deduction in case of questions later.
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Faith Kingston
When I had a similar issue last year, I used https://taxr.ai to upload my closing documents and tax forms. It automatically identified the missing prepaid interest from my first lender that wasn't on my 1098. The tool flagged it as potentially missed deductible interest and guided me through how to properly claim it even without getting a separate 1098 form. Saved me from missing out on that deduction! The system analyzed my closing statement and cross-referenced it with my 1098 form, then showed exactly where and how to report the missing prepaid interest when filing. Really helpful for these mortgage transition situations where things fall through the cracks.
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Emma Johnson
•Did it tell you the specific form or line to put that interest on? I'm doing my taxes myself this year and want to make sure I'm doing this right.
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Liam Brown
•Sounds interesting but I'm skeptical about using another service with my tax documents. How secure is it and does it integrate with regular tax software like TurboTax or H&R Block?
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Faith Kingston
•It guides you to report it on Schedule A under mortgage interest not reported on Form 1098. Most tax software has a specific field for this, usually right after you enter your regular 1098 information. The tool actually provides screenshots showing exactly where to enter it in popular tax programs. Regarding security, all documents are encrypted and they're SOC 2 compliant (which is the security standard for financial services). They don't replace your tax software - they analyze your documents and give you specific guidance to use while completing your return in TurboTax, H&R Block, or whatever software you normally use. You just follow their recommendations when entering your information.
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Liam Brown
Just wanted to follow up - I ended up trying taxr.ai with my closing documents and 1098 form. It immediately spotted the $630 in prepaid interest from my original lender that wasn't on my main 1098. I was honestly surprised how accurate it was! The guidance was super clear and walked me through exactly how to enter the additional interest in TurboTax. I wouldn't have known to look for the "mortgage interest paid but not reported on Form 1098" section. Would've just assumed I couldn't claim that interest since I didn't have a form for it. Thanks for the recommendation - saved me from missing a deduction I was entitled to!
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Olivia Garcia
When I had issues getting through to my mortgage company's customer service about a missing 1098 last year, I used https://claimyr.com to get someone on the phone. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was on hold with my credit union for over an hour trying to get answers about missing mortgage interest, then gave up. With Claimyr, I had someone from the credit union's tax department on the phone within 15 minutes. They were able to confirm they needed to issue me a separate 1098 for the closing interest and expedited sending it. Saved me hours of frustration and potentially missing that deduction altogether. Sometimes you just need to talk to a real person to get these tax document issues resolved!
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Noah Lee
•How does this actually work? Do they just call for you or something? Seems weird.
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Ava Hernandez
•This seems like a scam honestly. No way they can get through phone systems faster than I can. They probably just put you on hold while they wait in the same queue everyone else does.
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Olivia Garcia
•They use a system that navigates phone trees and waits on hold for you. When they finally get a real person, your phone rings and they connect you directly to the representative. You don't have to sit through any waiting or automated systems. It's not a magical system that jumps ahead in queues - they're just waiting in the queue for you so you don't have to waste your time listening to hold music. For financial institutions with notoriously long hold times (like some mortgage servicers), it's a huge time saver. You just go about your day and your phone rings when there's an actual human ready to talk.
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Ava Hernandez
Coming back to admit I was totally wrong about Claimyr. After waiting on hold with my mortgage company for almost 2 hours over 3 separate calls with no luck, I gave it a try out of desperation. Got a call back in about 40 minutes with an actual person from the tax department on the line! They confirmed they needed to issue me a separate 1098 for my closing costs interest and set it up immediately. Would have taken me days of trying to get through their phone system to reach the right department. Not sure how they navigate the phone systems so efficiently, but it definitely wasn't a scam. Saved me a ton of frustration and made sure I got the tax document I needed. Sometimes you have to admit when you're wrong - this service actually delivered exactly what it promised!
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Isabella Martin
Another thing to consider - if you're using your closing disclosure as proof for that prepaid interest amount, make sure you're looking at the final version. Sometimes there are changes between the initial disclosure and the final one given at closing. The amount listed under "prepaid interest" on the final closing disclosure is what you should be deducting (assuming you don't get a 1098 from the credit union).
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Elijah Jackson
•Is the closing disclosure the same as the HUD-1 form? Mine looks different than what my parents got when they bought their house a few years ago.
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Isabella Martin
•The Closing Disclosure replaced the HUD-1 form in October 2015 when the TRID rules went into effect. If your parents bought their house before then, they would have received a HUD-1, while newer purchases use the Closing Disclosure format. Both documents serve the same purpose - detailing all the costs associated with your mortgage loan - but they look different. On the Closing Disclosure, prepaid interest is typically shown on page 2 in the "Loan Costs" section under "Prepaid Items." The exact amount of interest and the dates it covers should be clearly listed there.
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Sophia Miller
Mortgage loan officer here. This happens all the time with loans that are sold shortly after closing. If you paid less than $600 in prepaid interest at closing, the credit union isn't technically required to send a 1098, but they should if you request one. Call the credit union's mortgage department (not just a branch) and ask to speak with someone about getting a 1098 for closing interest. Have your loan number and closing date handy. Explain the situation politely and most places will generate one for you. If they refuse, you can still deduct it without the form, but having the official 1098 makes filing easier and reduces audit risk.
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Diego Fisher
•Thanks for the insider perspective! I called the credit union's mortgage department this morning and they were super helpful. You were right - they said they don't automatically generate 1098s for amounts under $600 when the loan is sold, but they can definitely create one upon request. They're sending me a 1098 for just that prepaid interest amount within the next week. Makes me feel better having the official form rather than just using my closing disclosure as backup.
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Mason Davis
•Do people actually get audited over small amounts like this? Seems like the IRS would have bigger fish to fry than someone claiming an extra $500 in mortgage interest without a 1098.
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Alberto Souchard
•Audits for small amounts like this are pretty rare, but the IRS does use automated systems to match reported income and deductions. If you claim mortgage interest that doesn't match what's reported on 1098s, it could trigger a notice asking for documentation. It's usually not a full audit - more like a correspondence audit where they ask you to mail in proof. Having your closing disclosure showing the prepaid interest would typically satisfy them, but it's just easier to avoid the whole situation by getting the proper 1098 from the credit union like Diego did. The bigger issue is that without proper documentation, some people just don't claim deductions they're entitled to, which costs them money at tax time.
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Fatima Al-Mazrouei
Great to see this got resolved! For anyone else in a similar situation, it's worth noting that prepaid interest at closing is treated differently than regular monthly mortgage interest payments. It's considered "points" or prepaid interest and is fully deductible in the year you pay it (unlike refinancing points which sometimes have to be spread over the life of the loan). Also, if you're in this situation in the future, don't wait until tax season to sort it out. As soon as you get your 1098 from the new servicer and notice the prepaid interest is missing, contact the original lender right away. They're more likely to help when the loan transfer is still fresh in everyone's memory rather than months later during busy tax season. The key takeaway is that you're entitled to deduct that prepaid interest regardless of whether you get a 1098 for it - just make sure you have proper documentation from your closing.
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