The housing crisis still lingers, and state and federal agencies have been assisting homeowners who need help keeping their homes. So, the IRS family of 1098 forms now includes a report specifically for “mortgage assistance.” Form 1098-MA shows the payments.
If you received one for 2013, are you subject to tax on those mortgage assistance payments?
The National Association of Tax Professionals looked into that question after numerous inquiries. The short answer was “No.” Its researchers discovered those government agency payments fall within the “general welfare exclusion” and can be excluded from gross income.
But, there still is some tax caution here for mortgage-related deductions. If you deduct mortgage interest and/or real estate taxes on your federal return, the deduction can be limited because of the assistance.
The NATP says you can claim only the smaller one of two amounts – either the mortgage assistance (shown in Box 3 of Form 1098-MA) or the mortgage interest plus real estate taxes you actually paid.
If you have a tax advisor like EricJohn Ltd., he or she should be able to easily compute the right number.