mortgage loan made by an individual

See IRS Publication No. 936, e.g., at

particular the following sections: Part I. Home Mortgage Interest Secured Debt Debt not secured by home Qualified Home How To Report

and other sections as may apply to your case.

Dave

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As the pub states, the debt has to be secured by the home, so consult a lawyer to ensure the loan contract meets the requirements.

Once you meet the qualifications for deductibility, reporting it is a cinch:

"Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and taxpayer identification number (TIN) on the dotted lines next to line 11."

Even if the person isn't from whom you bought your home, showing the name and so on can't hurt.

-Mark Bole

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Not a financial planning question. You are likely to get a dispositive answer by posting to misc.taxes.moderated.

By father-the-CPA actually sent 1098-Mortgage statements for people for whom he loaned money secured by real property. He also filed Form 1096 with the IRS along with the 1098-Mortgage forms. You can download the forms and instructions from

. (Caveat: You cannot send the online forms to the IRS. You must use the red-ink paper forms, which you order from the IRS.)

I cannot say with impunity that he was right to send such forms, or that it was necessary. As I read the instructions, he was incorrect to do so. However, since his death, my mother's CPAs have continued the practice on her behalf without raising any questions.

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As mentioned by another poster, getting this stuff right, particularly documentation such that taxes can be handled right (ie. mortgage interest deductibility, paying taxes on interest income) and so that recourse is set up right (ie. forclosure in the event of default), etc - is far from trivial.

A lawyer could probably do much of it, but you might save yourself a lot of money going with a service which does a lot of this. Most mortgages are not held by the banks which issue them, nor are they serviced by the folks whose money is actually lent - someone lends the money, someone else sets up and issues the loan, and someone else may then service it (collect payments and forward them to the lender, send out statements and tax documentation).

I haven't had any reason to use them, but Circle Lending, which has now become Virgin Money - will take care of most of that for you. (I have no idea if there are any other similar relatively low-cost providers, but I'd be surprised if there weren't).

Anyway, take a look at

If you do use them, please let us on the newsgroup know how it goes.