IRS and the Interest Deduction

[msmith1199]

Anybody else having issues with the IRS on the mortgage interest deduction for the motorhome as a second home? My motorhome is financed through Wells Fargo Bank. For the entire life of the loan they have never sent me a 1098 for the Interest. I just get an end of year statement with the total interest paid, and I take the deduction. A couple of months ago I got a letter from the IRS with a bill and an explanation that the 1098's that were reported to them for mortgage interest do not match the amount I reported. They said to send in a written explanation if I didn't agree.

So I prepared the written explanation and attached a copy of my end of year statement and sent it all in. Well today I get the same letter saying based on my response I still owe them $1100. They say the documents I sent don't support the deduction.

Anybody else have this problem? Does your lender send you a 1098 for mortgage interest on the motorhome?

On Edit: I should have said form 1098 and not 1099 so I changed them.

[2bzy2c]

First off, the document he needs is the 1098. The 1099-int is for interest income received by him. In this case the 1098 reports interest paid by him.

The lender is required to furnish a 1098 to the tax payer by law and report the interest received by the lender in this case.

All he has to do is call the lender and request a copy of the 1098. Easy.

[msmith1199]

PawPaw_n_Gram wrote:

jrp wrote:
But since the IRS hasn't provided you a specific reason why they denied your deduction,

The IRS did provide him a specific reason - his 'second home' is the bare land because the IRS received a 1099/98 form.

msmith1199 wrote:
Funny thing is I also paid interest on some bare land I own and that interest was reported to me on a 1099. That interest is not deductible as the land is not improved and even if it was you only get one second home. But the IRS in both letters is giving me credit for that interest as a deduction. And in the letter I sent them I explained that I did not deduct that amount and why, but on the second letter they still left it on.

You are likely going to have to talk to an agent - and explain the 1099/98 for the interest paid on the bare land does not qualify as a second home because there is no home on the property.

That is what is causing the letter and the somewhat automated response.

They show two homes - your main residence and that bare land - so taking a third interest deduction for the motorhome is throwing the red flag.

Secondly - call the lender for the bare land and tell them to stop sending the 1099/98 form.

Thirdly - call your RV lender and tell them to send you that form for mortgage interest on the motorhome.

As mentioned above - when you talk to the IRS, act very polite and confused.

You might have to make a trip to one of their offices to get the whole issue resolved.

You know, I didn't think of that and you may be exactly right. Basically they are trying to pick my second home for me, instead of following the rules and letting me decide which one I get to use for the second home. I know there are people out there who own three or more homes and they get to decide which one gets used as the secondary. Since the IRS received a 1098 for that loan and not for the RV loan, maybe they have decided for themselves that's the one I have to use. I'll see if I can find that out from them.

[Francesca_Knowl]

msmith1199 wrote:

And on the 1099 on line that somebody mentioned, if they put the 1099 online they would have also reported it to IRS and IRS wouldn't be sending me the letter. My home mortgage is also through Wells Fargo and in fact the IRS did receive that 1099 as it's listed on the letter they sent me.

There's more than one 1099 form- according to Turbotax, the number is seventeen. Could be more by the time I get done typing here. 😉

It may be that the one with your primary residence on it only covers THAT property. Also, it sounds like you have some raw land- did you file another 1099 for that?

Now to say what I 'most always say to folks asking tax questions on forums like this one: If you don't already have a competent accountant to ask this kind of question of, please do go out and find one! The money you save may be your own....

[msmith1199]

jrp wrote:
I read it and am still confused by both you and the responses. a 1099 is used when you receive interest or misc income. a 1098 is used when you pay mortgage interest. Most banks only issue a 1098 when the loan is for real property. But you are still entitled to the deduction, if your loan meets the IRS requirements. The loan must be a "secured loan" for the specific "home" you're claiming as a 2nd home, not a general loan.
But since the IRS hasn't provided you a specific reason why they denied your deduction, your next step is to follow up with them to get the specifics. We can only guess.
As to whether others have had the same problem, a few do, most don't. I deducted my MH loan interest for 10 yrs with no 1098 and no problems. There is a specific line on the deduction form for mortgage interest with no 1098 issued.

You are correct, my error on 1099. I should have said 1098.

[msmith1199]

Thanks Old-Bisquit, I'll have to go back and look at my forms. I use Turbo-Tax so it got reported where ever Turbo-Tax put it, but I'm pretty sure it was all on line 10.

[PawPaw_n_Gram]

jrp wrote:
But since the IRS hasn't provided you a specific reason why they denied your deduction,

The IRS did provide him a specific reason - his 'second home' is the bare land because the IRS received a 1099/98 form.

msmith1199 wrote:
Funny thing is I also paid interest on some bare land I own and that interest was reported to me on a 1099. That interest is not deductible as the land is not improved and even if it was you only get one second home. But the IRS in both letters is giving me credit for that interest as a deduction. And in the letter I sent them I explained that I did not deduct that amount and why, but on the second letter they still left it on.

You are likely going to have to talk to an agent - and explain the 1099/98 for the interest paid on the bare land does not qualify as a second home because there is no home on the property.

That is what is causing the letter and the somewhat automated response.

They show two homes - your main residence and that bare land - so taking a third interest deduction for the motorhome is throwing the red flag.

Secondly - call the lender for the bare land and tell them to stop sending the 1099/98 form.

Thirdly - call your RV lender and tell them to send you that form for mortgage interest on the motorhome.

As mentioned above - when you talk to the IRS, act very polite and confused.

You might have to make a trip to one of their offices to get the whole issue resolved.

[jrp]

I read it and am still confused by both you and the responses. a 1099 is used when you receive interest or misc income. a 1098 is used when you pay mortgage interest. Most banks only issue a 1098 when the loan is for real property. But you are still entitled to the deduction, if your loan meets the IRS requirements. The loan must be a "secured loan" for the specific "home" you're claiming as a 2nd home, not a general loan.
But since the IRS hasn't provided you a specific reason why they denied your deduction, your next step is to follow up with them to get the specifics. We can only guess.
As to whether others have had the same problem, a few do, most don't. I deducted my MH loan interest for 10 yrs with no 1098 and no problems. There is a specific line on the deduction form for mortgage interest with no 1098 issued.

[Old-Biscuit]

Isn't Mortgage Interest Paid reported on Form 1098 (1099-Int is interest earned)??

When you filed Federal Return did you report the interest paid on line 10 or line 11 of Schedule A?

Should have been separate from home mortgage interest paid (line 10)

"Tax deductibility of interest on RV / Motorhome loans

Under IRC section 163 (h)(2) a taxpayer may deduct any qualified interest on a qualified residence, which is defined as a principal residence and one other residence owned by the taxpayer for the purpose of deductibility for the tax year. IRC section 163(h)(3) defines qualified residence interest as any interest which is paid or accrued during the tax year on acquisition or home equity indebtedness with respect to any qualified residence of the taxpayer.

In accordance with IRC section 163(h)(4), an RV will be considered a qualified residence if it is one of the two residences chosen by the taxpayer for purposes of deductibility in the tax year as long as it provides basic living accommodations such as sleeping space, a toilet, and cooking facilities. If the RV is chartered out, the taxpayer will have to use the RV for personal purposes for either more than 14 days or 10% of the number of days during the year the RV was actually rented, in accordance with IRC section 280A(d)(1).


Form 1098 is not necessary in order to receive the qualified interest deduction. In accordance with IRS instructions for Schedule A, form 1040, if the taxpayer does not receive form 1098, deductible mortgage interest should be reported in line 11 instead of line 10 on Schedule A."

Re-submit copy of Schedule A with explanation that home mortgage interest paid was XXXX and that the MH interest paid was XXX with copies of home mortgage interest and MH loan statement showing interest paid.

Sometimes the IRS folks aren't too bright.
Fought with them with 3 yrs. because they had misfiled a properly submitted form.
Finally got in touch with IRS Advocate (part of IRS that helps folks with IRS issues). They looked at the info I had repeatedly submitted and went....OH that form was misfiled as income :S

You have to prove them wrong..which they NEVER will admit too!!!

[time2roll]

Call and speak with an IRS agent(act very nice and a bit confused) to see if there is some understanding on a better way to proceed.

BTW you may as well post the form and line that the second home interest deduction was taken.

I had no issue in the four years I reported the deduction on my trailer. I used turbo tax.

[msmith1199]

Bill.Satellite wrote:
The simple answer is NO, you should not have any issues deducting your RV as a 2nd home unless you have something else that would be considered a 2nd home. You should be getting a 1099-int for the RV loan but if you don't you should be able to request one. Even without that, you must have proof that you paid interest on a loan related to your RV (the only thing that could be considered a 2nd home) and this will be usable as proof of ownership.

Okay, but if you read what I wrote I did all that and they are saying no good. Just wondering if anybody else is having this issue. They have given a phone number to call them so I'll try calling on Monday, but I think we all know how well that is going to work. I think what I'll do first is contact Wells Fargo and see if I can get them to issue a 1099 for the loan.

[msmith1199]

jorbill2or wrote:
I've always done just as you as it's not a mortgage loan it's a vehicle loan . The interest is still deduct able as long as it has a bed ,cooking and bathroom facility . It doesn't matter who loans the money. Heck if uncle Larry loans you money for your stick home and charges interest he's not providing a 1099 and the interest is still deductible. I'd request a hearing.

I actually used that very language with them in the explanation letter I sent them.

[msmith1199]

rctour wrote:
I believe the statement is a substitute 1099. As a CPA for 35 years the previous is what I would do. But I have learned in the past that many of you do things a little differently than I do. Just a suggestion that seems simple to me.

That's why I sent them a copy of the statement but they have said that's not good enough apparently. Actually all the really said is the documents I sent them do not support the deduction.

And on the 1099 on line that somebody mentioned, if they put the 1099 online they would have also reported it to IRS and IRS wouldn't be sending me the letter. My home mortgage is also through Wells Fargo and in fact the IRS did receive that 1099 as it's listed on the letter they sent me.

Funny thing is I also paid interest on some bare land I own and that interest was reported to me on a 1099. That interest is not deductible as the land is not improved and even if it was you only get one second home. But the IRS in both letters is giving me credit for that interest as a deduction. And in the letter I sent them I explained that I did not deduct that amount and why, but on the second letter they still left it on. I'm just wondering if this is the new IRS making mistakes like this. In all my years of filing tax returns I've never had a single issue with the IRS.

[Bill_Satellite]

The simple answer is NO, you should not have any issues deducting your RV as a 2nd home unless you have something else that would be considered a 2nd home. You should be getting a 1099-int for the RV loan but if you don't you should be able to request one. Even without that, you must have proof that you paid interest on a loan related to your RV (the only thing that could be considered a 2nd home) and this will be usable as proof of ownership.

[jorbill2or]

I've always done just as you as it's not a mortgage loan it's a vehicle loan . The interest is still deduct able as long as it has a bed ,cooking and bathroom facility . It doesn't matter who loans the money. Heck if uncle Larry loans you money for your stick home and charges interest he's not providing a 1099 and the interest is still deductible. I'd request a hearing.

[rctour]

I believe the statement is a substitute 1099. As a CPA for 35 years the previous is what I would do. But I have learned in the past that many of you do things a little differently than I do. Just a suggestion that seems simple to me.

It's not a 1099-INT or 1098, it's just a substitute 1099 showing how much interest they earned on your loan. Then I guess you need to show how the loan relates to your second home, letter, pictures?