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How to deal with Form 1098-MA

In 2010, the U.S. Treasury Department created Hardest Hit Fund (HHF) to help State housing finance agency (HFA) provide help to homeowners who risked losing their primary residence due to undue financial hardship. However, there isn’t much guidance on tax treatment and reporting of such payments and this has created confusion.

In short, payments made to the mortgage lender on behalf of homeowners under State HFA programs are excluded from gross income (source). Consequently, homeowners are not allowed mortgage interest deduction for the amounts paid by State HFA programs (source).


Amounts paid by State HFA Programs are reported to homeowners on Form 1098-MA. Here’s what you need to know about Form 1098-MA:

  • It’s an informational form, there’s no reporting requirement.
  • Amounts in Box 1 or 2 reflect gross payments (principal+interest) made by State HFA Program.
  • IRS provides a safe harbor method to deduct mortgage interest; an amount equal to the sum of all interest payments paid by the homeowner, excluding those made by State FHA Program.

How to figure out deductible mortgage interest

Apart from 1098-MA, you will receive Form 1098 Mortgage Interest Statement from your lender. This form has the “total” amount of mortgage interest paid on your loan. Chances are, you applied for hardship during the year but in the meantime stayed current on your mortgage.

Keeping math simple, say your mortgage is $12,000/year – $500 interest, $500 principal – and you paid mortgage for 4 months. In that case, you paid $2,000 mortgage interest.

Your monthly mortgage statement can help you figure out this amount. Once you calculate your portion, enter that amount on your Schedule A. Please note, the amount you enter on Schedule A will never be equal to or greater than the amount shown on your Form 1098 Mortgage Interest Statement.

Disclaimer: Any tax advice contained in this post, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. Please seek a tax professional to research your specific issue.