What Does the Mortgage Bank Report to the IRS?
Several expenses are deductible on your income taxation. But the government isn’t going to take your word for it when it comes to reporting those deductions. It will compare the numbers you maintain with the numbers recorded by your mortgage lender.
Deductions
Your mortgage lender will report to the IRS. If you paid some”points” if you closed your loan, the lending company will report those, too. If your lender requires you to cover mortgage insurance a common practice when a debtor lacks a large down payment — the amount you paid in premiums will be reported to the IRS. Any property taxes the creditor will be reported. All of these are expenses.
Mortgage Interest Record
To report this information, a creditor puts it all in an IRS record, Form 1098. Every creditor must file this form, which can be tagged”Mortgage Interest Statement,” with the IRS for every one of its borrowers every year. The creditor should also provide the borrower with a copy of the form.
Reimbursements
If your creditor reimburses you for interest you overpaid in a preceding year, it is going to report that to the IRS on Form 1098, as well. If you claimed a deduction in that year to the interest, you’ll need to reduce the current year’s interest deduction from the quantity of the overpayment. Some creditors pay interest on overpaid monies that they hold inside their own accounts for a while. If your creditor pays more than $10 in interest on the money that you overpaid, it must report the amount to the IRS, too, and you’ll be expected to report it as income in your own taxes.
Claiming Deductions
You must itemize your income tax deductions, to claim deductions to the mortgage-related expenses reported on the IRS by your creditor. Use Schedule A to itemize.
Caution
Like most financial institutions, mortgage lenders are required by law to report large cash transactions. Should you use over $10,000 in money — actual U.S. currency — for any payment, such as for escrow, closing costs or loan payments, the notification requirement applies. Such transactions are reported by the creditor . When you are the subject of a Form 8300 filing, by law, you must be notified.