What Is Form 1098-MA: Mortgage Assistance Payments?

Form 1098-MA, Mortgage Assistance Payments, is an informational document provided to homeowners who have received aid from specific government programs. This form relates to aid from now-concluded federal programs, such as the HFA Hardest Hit Fund and the Emergency Homeowners’ Loan Program (EHLP), created to help homeowners avoid foreclosure. The form is issued by the state or federal agency that administers the assistance. Its primary function is to provide homeowners with the necessary figures to accurately calculate their mortgage interest deduction for their federal income tax return. This document works with the more common Form 1098, Mortgage Interest Statement, that homeowners receive from their lender.

Understanding the Information on Form 1098-MA

Form 1098-MA provides a clear breakdown of payments made toward a mortgage from both government assistance programs and the homeowner. The “Payer” listed on the form is the State Housing Finance Agency (HFA) or the Department of Housing and Urban Development (HUD) that administered the funds. The “Recipient” is the homeowner who benefited from the assistance program.

The form contains specific financial details organized into numbered boxes. Box 1 shows the total amount of payments made during the year, which includes both government assistance and any payments made by the homeowner. Box 2 reports the amount of mortgage assistance payments made by the government agency. Box 3 shows the total amount of payments the homeowner made.

Tax Implications of Mortgage Assistance Payments

For payments reported on Form 1098-MA, the funds are generally not considered part of the homeowner’s gross income for federal tax purposes. You do not need to report these assistance payments as income on your Form 1040. The primary tax implication of receiving this assistance relates to itemized deductions.

Homeowners who itemize deductions can typically deduct the mortgage interest they pay during the year. When a government program pays a portion of that interest, the homeowner cannot claim a deduction for the amount they did not personally pay. Therefore, the assistance payments reported on Form 1098-MA directly reduce the total amount of mortgage interest a homeowner can deduct. The deduction is limited to the interest the homeowner actually paid out of their own funds.

Reporting Mortgage Interest on Your Tax Return

When preparing a tax return, homeowners must use both Form 1098-MA and the standard Form 1098, Mortgage Interest Statement, to determine the correct deduction amount. Form 1098, which comes from the mortgage lender, shows the total interest paid on the loan for the year in Box 1. This figure includes payments made by the homeowner and any third party, such as a government agency. The information on Form 1098-MA is not entered directly onto the tax return but is used for calculation purposes.

The homeowner takes the total mortgage interest reported in Box 1 of Form 1098 and subtracts the government assistance payments shown in Box 2 of Form 1098-MA. This final figure is then reported on Schedule A (Form 1040), Itemized Deductions, on the line designated for home mortgage interest. For example, if your Form 1098 shows $10,000 in mortgage interest paid and your Form 1098-MA shows the government paid $4,000 on your behalf, your deduction is limited to $6,000.

The IRS offers a safe-harbor method that may simplify calculations for some taxpayers who meet specific tests, allowing them to deduct the sum of all payments they actually made during the year up to the total interest and taxes reported on Form 1098.