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Form 1098 Mortgage Interest Statement: What's New?

December 21, 2016

Form 1098 is used by banks and other lenders to report mortgage interest payments of $600 or more from borrowers. The 2016 version of the form adds several new boxes designed to provide additional information to the IRS. In the last few months the IRS has released revisions to its form instructions in response to questions from bankers concerning the new information being requested.

What New Information?
The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, better known as the "Highway Bill," expanded Form 1098 information reporting to include:
 -
The amount of the outstanding mortgage principal as of the beginning of the calendar year
 - The mortgage origination date
 - The address of the property securing the mortgage

This new information is required for Forms 1098 filed after 2016, including those for calendar year 2016 to be filed in 2017. When enacting the Highway Bill, Congress anticipated that the new information will allow the IRS to more easily identify taxpayers who deduct more mortgage interest than currently allowed (interest on mortgages up to $1 million and home equity debt up to $100,000) and raise $1.8 billion for the government over the 10 year period from 2015 to 2025.

Which Boxes on Form 1098 Are New?
The new requirement to provide the beginning of year mortgage balance is captured in new Box 2. If the mortgage originated in 2016, leave the box blank. The mortgage origination date is reported in new Box 3.

New Box 7 asks whether the address of the property securing the mortgage is the same as the borrower's address shown on the form. If the checkbox indicating a "yes" answer is checked, that should complete the required information.

If, however, the checkbox at Box 7 is not completed, new Box 8 must report the address of the property securing the mortgage. Generally, this will be the street address, city or town, state or province, country and ZIP or foreign postal code of the property. 

In instances where the property securing the mortgage has no address, new Box 9 provides space to enter the property's jurisdiction (for example, county and state) and the property's Assessor Parcel Number ("APN"). This is the number assigned to parcels of real property by the local tax assessor of a particular jurisdiction and, typically, is shown on tax assessment documents and other public records. 

No APN?
If the APN (or other comparable identification number) is not readily available, the IRS permits use of the legal description of the mortgaged property (abbreviated as necessary).

Multiple Properties Securing a Mortgage?
If more than one property secures a mortgage loan and the Box 7 checkbox is left blank, only one property's address needs to be listed in Box 8 or Box 9.

More to Come?
The IRS has released the 2017 version of Form 1098 and the related instructions. The only significant change for 2017 is to add a new Box 10 for reporting the number of mortgaged properties. Be prepared to retrieve this information next year.

Keep in mind that 2016 Forms 1098 are to be sent to borrowers by Jan. 31, 2017, and filed with the IRS on paper by Feb. 28, 2017, or March 31, 2017, if filed electronically. Updates to the Form 1098 instructions can be monitored at the IRS websiteThis link takes you to an external website..

Should you have any questions concerning Form 1098 filing requirements, please contact your local Eide Bailly tax professional.