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Form 1098 Mortgage Interest, Box 3 Refund of overpaid interest how to properly determine taxable amount.

HELP! I am confused as to how to properly report 1098 Mortgage Interest Box 3 for I have never had a similar case.

Taxpayer's late husband submitted a claim back in 2010 for a class action settlement for mortgage discrimination related to deficient servicing and foreclosure processes. Husband passed away mid 2011.   

In 2015 they awarded an amount and mailed a check for $22,800.00 to the surviving spouse. The transaction was reported on form 1098 Mortgage Interest Statement with box 3 completed stating the awarded amount ($22,800.00).

For 2015 Taxpayer made $31,208 in wages, files as single, had no dependents and is claiming itemized deductions in the amount of $10,000. Last year she claimed itemized deductions in the amount of $11,500.00. Taxpayer also received  Premium Tax Credits (PTC) in the amount of $5,772.

Taxpayer did

not report the changes in income to the market exchange health provider and therefore no changes to the PTC were made, she continued to receive the assistance until the end of the year.

I entered wages ($31,208) and the $22,800 on line 21 (other Income) of the 1040, this increases her total income to $54,008. AGI is set to $54,008 and therefore reflects that she was not eligible for PTC. Calculations on system shows that she must repay the entire PTC of $5,772.00. Tax liability also increased and she's looking at having to pay back about 10K.

Could it be that I am entering something incorrectly?

Do I report this amount on line 21 of 1040 or Schedule A?

Could this amount be excluded in any way or can I make any adjustments to it?


Category: Mortgage interest

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