Instructions For Form 1098 - 2017 (Page 4 of 6) in pdf

2. They are computed as a percentage of the stated

Conform to an established business practice of

principal loan amount.

charging points in the area where the loan is issued and

do not exceed the amount generally charged in the area;

3. They are charged under an established business

Are paid in connection with a loan incurred by the payer

practice of charging points in the area where the loan was

of record to construct (or refinance construction of) a

issued and do not exceed the amount generally charged

residence that is to be used, when completed, as the

in that area.

principal residence of the payer of record;

4. They are paid for the acquisition of the payer of

Are paid directly by the payer of record; and

record's principal residence, and the loan is secured by

Are not allocable to an amount of principal in excess of

that residence. You may rely on a signed written

$1 million.

statement from the payer of record that states that the

Amounts paid to refinance a loan to construct a

proceeds of the loan are for the purchase of the payer of

residence are not points to the extent they are allocable to

record's principal residence.

debt that exceeds the debt incurred to construct the

5. They are paid directly by the payer of record. Points

residence.

are paid directly if either a or b below applies.

Prepaid Interest

a. The payer of record provides funds that were not

borrowed from the lender of record for this purpose as

Report prepaid interest (other than points) only in the year

part of the overall transaction. The funds may include

in which it properly accrues.

down payments, escrow deposits, earnest money applied

Example. Interest received on December 20, 2017, that

at closing, and other funds actually paid over by the payer

accrues by December 31 but is not due until January 31,

of record at or before closing.

2018, is reportable on the 2017 Form 1098.

b. The seller pays points on behalf of the payer of

Exception. Interest received during the current year that

record. Points paid by the seller to the interest recipient on

will properly accrue in full by January 15 of the following

behalf of the payer of record are treated as paid to the

year may be considered received in the current year, at

payer of record and then paid directly by the payer of

your option, and is reportable on Form 1098 for the

record to the interest recipient.

current year. However, if any part of an interest payment

Report points paid under 5a and 5b on the payer of

accrues after January 15, then only the amount that

record's Form 1098 in box 6.

properly accrues by December 31 of the current year is

reportable on Form 1098 for the current year. For

Exceptions. Do not report as points on Form 1098

example, if you receive a payment of interest that accrues

amounts paid:

for the period December 20 through January 20, you

For loans to improve a principal residence;

cannot report any of the interest that accrues after

For loans to purchase or improve a residence that is not

December 31 for the current year. You must report the

the payer of record's principal residence, such as a

interest that accrues after December 31 on Form 1098 for

second home, vacation, investment, or trade or business

the following year.

property, even though the borrower may be entitled to

amortize points paid for the purchase of a second home,

Prepaid Mortgage Insurance

vacation home, etc., and deduct them over the life of the

Except for amounts paid to the Department of Veterans

loan;

Affairs or the Rural Housing Service, payments allocable

For a home equity or line of credit loan, even if secured

to periods after 2007 are treated as paid in the periods to

by the principal residence;

which they are allocable.

For a refinancing (but see

Construction

loans, below),

The Treasury Department has issued regulations for

including a loan to refinance a debt owed by the borrower

allocating prepaid qualified mortgage insurance

under a land contract, a contract for deed, or similar forms

premiums. Regulations section 1.163-11 applies to

of seller financing;

prepaid qualified mortgage insurance premiums paid or

In lieu of items ordinarily stated separately on the Form

accrued on or after January 1, 2011, provided by the

HUD-1, such as appraisal fees, inspection fees, title fees,

Federal Housing Administration or private mortgage

attorney fees, and property taxes; and

insurers. For regulations applicable before January 1,

To acquire a principal residence to the extent the points

2011, see Regulations section 1.163-11T.

are allocable to an amount of principal in excess of $1

million.

Reimbursement of Overpaid Interest

Construction loans. Amounts paid on a loan to

You are required to report reimbursements of overpaid

construct a residence (construction loan) or to refinance a

interest aggregating $600 or more to a payer of record on

loan incurred to construct a residence are reportable on

Form 1098. You are not required to report

Form 1098 as points if they:

reimbursements of overpaid interest aggregating less

Are clearly designated on the loan documents as points

than $600 unless you are otherwise required to file Form

incurred in connection with the loan, such as loan

1098. That is, if you did not receive at least $600 of

origination fees, loan discount, discount points, or points;

mortgage interest during the year of reimbursement from

Are computed as a percentage of the stated principal

the person to whom you made the reimbursement, you

loan amount;

are not required to file Form 1098 merely to report a

reimbursement of less than $600. However, you may

report any reimbursement of overpaid interest that you are

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Instructions for Form 1098 (2017)

Instructions For Form 1098 - 2017 Page 4

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