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Interest Reporting on Seller's Payments

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If a seller pays part or all of a borrower’s prepaid interest at closing as part of seller paid closing costs, should the interest the seller paid be included in the total interest reported on the 1098 for the borrower? This is not clear in the instructions. Under seller payments it indicates not to report seller payments on buy down type mortgages, but doesn't address prepaid specifically.

The borrower did not pay this interest, why would they be entitled to its deduction?

From the 1098 instructions:

Seller Payments

Do not report in box 1 of Form 1098 any interest paid by a seller on a purchaser’s/borrower’s mortgage, such as (this is giving an example) on a “buy-down” mortgage.

Then further down in the same section:

...However, if you wish, you may use box 5 to report to the payer of record any interest paid by the seller.

First published on 2/04/08

First published on 02/04/2008

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Filed under lending as: 

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