Will someone please help solve an argument in our bank? We have an officer who is upset that we have taken off the mortgage flag for some of his customers to get a 1098 after the first of the year. The reason they were unflagged is because these properties are rental properties.

My argument is that a 1098 is only for reporting home mortgage interest. I am not saying that his customers cannot file a deduction for the interest on rental property loans on their taxes. I just don't think that they should get a 1098 form. Who is correct?

I am no expert, but I thought that if the interest paid is less than $600, the lender did not have to send a 1098. I have a home equity loan and have had a couple of occasions where I didn't get one due to a "low" amount of interest paid.

That is correct. However, on amounts more than $600, it is my understanding that 1098s should only be sent out on 1-4 family residential properties that is the borrower's residence (or second home).

Not sure-I think I get one for my rental properies (non owner)..maybe it is optional.

You are required to file a Form 1098 if you received mortgage interest of $600 or more from an individual. There is no distinction between loans on primary residences, second homes, rental property or other forms of real estate. In fact, a loan secured by commercial real estate would require a 1098 if the obligor is an individual.

Thank you.

Borrower is an individual who has a commercial loan secured by a mortgage on three convenience stores. His CPA indicates that the bank should have provided him with a 1098 for any interest paid over $600. He indicated that since there is a "mortgage" that his client should get a 1098. I looked at the 1098 instructions on the IRS website and it had a definition for "real property"; however I'm still not clear on this. Is real property referring to the land and a dwelling of some sort or could it be land and the convenience stores? If there is a "mortgage", then should we provide the 1098?

What name is the mortgage in?

The customer with his SSN, or the business with it's EIN?

The customer is a sole proprietorship and the mortgage is in his name using his SSN.

The customer is a sole proprietorship and the mortgage is in his name using his SSN.

I would have supplied him with a 1098.

Review John's post above.

What about a Trust being reported under the Trustee's SSN? This one is on a commercial warehouse.

Per the 1098 instructions you are not required to report interest on a loan to a trust - it's the primary borrower (along with the collateral), not the TIN, that drives this requirement.

If you don't have a primary borrower indicated, you need to select one. If the primary borrower is a non-individual, you are not required to send a 1098 -- even if a co-borrower who is an individual owns the real estate.

For example, assume that XYZ Corp. is owned by Sam Zyx. Sam also owns the real estate that XYZ Corp leases from him for its operations. XYZ Corp has a business loan with your bank, secured by a real estate mortgage given by Sam Zyx.

The corporation is your primary borrower. Even if Sam makes some of the payments from his own funds, the corporation remains your primary borrower. You have no obligation to provide Sam with a 1098.

This thread is helpful! I'm reading the IRS 1098 instructions, and can someone let me know if I've got it right? I think I've been confusing when to report vs. when to report points.

1. I report/send a 1098 for any loan we made to a person or sole proprietor secured by real property (any type, not just residences) who paid more than $600 in interest.

2. I only report "points" for the above loans that the loan purpose was the purchase of their prinipal residence. Points paid by borrowers for loans for any other purpose are not reported.

2. Purchase primary, construct primary or construct/perm primary residence = report points.