Why did I get a 1098 with my Reverse Mortgage?

Building a personal collection of rare items can be quite entertaining. Some of the most commonly collected items are pocket knives, comic books, sports cards, and postage stamps. While I have a small, but growing collection of coins, I may have the most obscure collection of all – reverse mortgage questions.

I do collect them, and occasionally I receive questions that are not addressed in my book, Understanding Reverse, because I would not consider them to be “top questions” material. The following is a recent addition to my collection that is important to know during tax season:

Why would a borrower get an IRS Form 1098 on a Reverse Mortgage? Does this mean they owe taxes?

This does create some confusion for reverse mortgage borrowers every January, and it needs to be addressed. Most reverse mortgage borrowers, however, won’t get a 1098 simply because most of them don’t make payments. Some will. In fact, we described some advantages in a previous post – Wait, Make Payments?


While I am not a tax professional, I can state that IRS Form 1098 is a form that lists items that were paid by the borrower. This is for tax and accounting purposes, and does not increase their tax liability. The Form 1098 is used to report potential deductions, and therefore may REDUCE their tax liability. For our purposes though, it means that the borrower made prepayments during the previous year that were applied to either their accrued mortgage insurance or their accrued mortgage interest.

The IRS deduction for Mortgage INSURANCE (itemized on line 4) was renewed by congress for tax year 2014. However, this deduction is very limited (see IRS Publication 936 [2014]). Therefore, the borrower may not be able to write-off that amount. Mortgage INTEREST (itemized on line 1), however, is more likely to be deducted. Of course it will depend on other factors that you should discuss with your tax professional. Nevertheless, the loan servicer is required to notify the borrower with a 1098 when payments exceed $600.

So, in summary, a reverse mortgage borrower may get a 1098 in January after making prepayments in the previous year and should consult their tax preparer. The borrower may, or may not, have a deductible item on the form, but it does not indicate the need to pay more taxes.

I have been collecting reverse mortgage questions for several years, and I’m aware that many in my collection hold limited value. Nevertheless, the answers to the most common questions asked about reverse mortgages were the basis for writing the book, Understanding Reverse, which has been helpful to many industry professionals and older homeowners.

If you would like to add to my collection, and possibly have your question anonymously addressed in my blog, please don’t hesitate to click the “CONTACT US” tab in the upper right corner.

Dan Hultquist