Notice 2013-7

Extension of Guidance
in Notice 2011–14 and
Rev. Proc. 2011–55 for
Participants in the HFA
Hardest Hit Fund, the
Emergency Homeowners’
Loan Program, and
Substantially Similar State
Programs
Notice 2013–7
PURPOSE
This notice amplifies Notice 2011–14,
2011–11 I.R.B. 544, by extending through
taxable year 2015 the safe harbor method
for computing a homeowner’s deduction
for payments made on a home mortgage.
This notice also amplifies Notice 2011–14
by extending through calendar year 2015
the relief for mortgage servicers and state
housing finance agencies (State HFAs)
from penalties relating to information
reporting, and by advising the Department of Housing and Urban Development
(HUD) that it may rely on Notice 2011–14
through calendar year 2015 to report to
homeowners and the Internal Revenue
Service the payments it makes to mortgage
servicers. In addition, this notice amplifies
Notice 2011–14 by revising the safe harbor method for computing a homeowner’s
deduction because of the extension of the
deduction for mortgage insurance premiums that was enacted by section 204 of the
American Taxpayer Relief Act of 2012,
Pub. L. No. 112–240, 126 Stat. 2313
(ATRA).
This notice also amplifies Rev. Proc.
2011–55, 2011–47 I.R.B. 793, by extending its scope and effective date through calendar year 2015.
Finally, this notice supplements Notice
2011–14 and Rev. Proc. 2011–55 by
updating the list of housing programs to
which Notice 2011–14 and Rev. Proc.
2011–55 apply.
BACKGROUND
Notice 2011–14 provides guidance on
the federal income tax consequences of,
and information reporting obligations for,
payments made to or on behalf of financially distressed homeowners under (1)
programs designed by State HFAs (State

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Programs) with funds allocated from the
Treasury Department’s Housing Finance
Agency Innovation Fund for the Hardest-Hit Housing Markets (HFA Hardest
Hit Fund), and (2) HUD’s Emergency
Homeowners’ Loan Program (EHLP) and
any existing state program that is substantially similar to the EHLP and is eligible
to administer an allocation of funds from
the EHLP (the substantially similar state
programs, or SSSPs).
The Appendix in Notice 2011–14 lists
all of the State Programs that, as of the
date Notice 2011–14 was released, the
Treasury Department had approved for
funding from the HFA Hardest Hit Fund.
Subsequent to the publication of Notice
2011–14, the Treasury Department continues to approve funding for additional
State Programs. An updated list of State
Programs for which the Treasury Department approves funding is available
at www.treasury.gov/HHF. All of these
programs are covered by Notice 2011–14,
Rev. Proc. 2011–55, and this notice.
For taxable years 2010, 2011, and 2012,
Notice 2011–14 provides a safe harbor
method for determining the amount that
a homeowner may deduct on his or her
federal income tax return. Under the safe
harbor method, a homeowner may deduct
the sum of all payments the homeowner
actually makes during a taxable year to
the mortgage servicer, HUD, or the State
HFA on the home mortgage, but not in
excess of the sum of the amounts shown
on Form 1098 in box 1 (Mortgage interest received), box 4 (Mortgage insurance
premiums) for years 2010 and 2011 only,
and box 5 (real property taxes). This safe
harbor method of computing the homeowner’s deduction applies for a taxable
year if (1) the homeowner meets the requirements of §§ 163 and 164 to deduct all
of the mortgage interest on the loan and all
of the real property taxes on the principal
residence, and (2) the homeowner participates in a State Program described in the
Appendix to Notice 2011–14 in which the
program payments could be used to pay
interest on the home mortgage, or in the
EHLP or an SSSP.
Section 204(a) of ATRA provides that
§ 163(h)(3)(E)(iv)(I) of the Internal Revenue Code is amended by striking December 31, 2011, and inserting in its place December 31, 2013. The effect of this amendment is to extend the deduction for quali-

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fied mortgage insurance premiums paid or
accrued in, or properly allocable to, years
2012 and 2013.
Notice 2011–14 provides that the Service will not assert penalties under §§ 6721
and 6722 of the Code against a mortgage servicer that reports on Forms 1098,
Mortgage Interest Statement, payments
received under a State Program, the EHLP,
or an SSSP during calendar years 2011 or
2012 if the servicer notifies homeowners
that the amounts reported on the Forms
1098 are overstated because they include
government subsidy payments.
Notice 2011–14 also provides that the
Service will not assert penalties under
§§ 6721 and 6722 against any State HFA
for failing to file and furnish Forms 1098
for calendar years 2011 and 2012 if the
State HFA provides each homeowner and
the IRS a statement setting forth (1) the
homeowner’s name and taxpayer identification number (TIN), and (2) the amount
of payments the State HFA made to a
mortgage servicer under the State Program
or the SSSP during that year (separately
stating the amount the State HFA paid and
the amount the homeowner paid). The
statement the State HFA provides to the
IRS must be a single statement that separately lists the names, TINs, and relevant
payment amounts for each homeowner.
For calendar years 2011 and 2012, Notice 2011–14 advises HUD to provide each
homeowner and the IRS a statement setting forth (1) the homeowner’s name and
TIN, and (2) the amount of payments HUD
made to the mortgage servicer under the
EHLP during that year (separately stating
the amount HUD paid and the amount the
homeowner paid). The statement HUD
provides to the IRS should be a single
statement that separately lists the names,
TINs, and relevant payment amounts for
each homeowner.
Rev. Proc. 2011–55 modifies Notice
2011–14 to specify the IRS office to which
State HFAs and HUD should send the
statement required by Notice 2011–14,
and provides that State HFAs and HUD
may, at their option, use Form 1098–MA,
Mortgage Assistance Payments, to provide the information required by Notice
2011–14. Rev. Proc. 2011–55 is effective for calendar years 2011 and 2012
and applies to (1) State HFAs that make
payments to mortgage servicers under a
State Program or an SSSP, and (2) HUD

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for payments made to mortgage servicers
under the EHLP.
APPLICATION
Income Tax Consequences to Homeowners
For taxable years 2010 through 2015,
a homeowner may deduct on his or her
Federal income tax return the lesser of—

•

•

The sum of all payments on the home
mortgage that the homeowner actually
makes during a taxable year to the
mortgage servicer, HUD, or the State
HFA; and
The sum of amounts shown on Form
1098 for mortgage interest received,
real property taxes, and (for years
2010 through 2013 only) mortgage
insurance premiums. (For Forms 1098
issued for 2010 and 2011, mortgage
servicers report these amounts in Box
4 (Mortgage insurance premiums). On
Form 1098 for 2012, Box 4 is unlabeled, but, pursuant to instructions,
mortgage servicers should again report
these amounts in Box 4.)

This safe harbor method of computing the
homeowner’s deduction applies for a taxable year if (1) the homeowner meets the
requirements of §§ 163 and 164 to deduct
all of the mortgage interest on the loan and
all of the real property taxes on the principal residence, and (2) the homeowner participates in a State Program in which the
program payments could be used to pay interest on the home mortgage, or the EHLP
or an SSSP.
Information Reporting Obligations
The Service will not assert penalties under §§ 6721 and 6722 against a mortgage
servicer that reports on Forms 1098 payments received under a State Program, the
EHLP, or an SSSP during calendar years
2011 through 2015 if the servicer notifies
homeowners that the amounts reported on
the Form 1098 are overstated because they
include government subsidy payments.
The Service will not assert penalties under §§ 6721 and 6722 against any State
HFA for failing to file and furnish Forms
1098 for calendar years 2011 through 2015
if the State HFA provides each homeowner
and the IRS a statement setting forth (1)
the homeowner’s name and TIN, and (2)

February 4, 2013

the amount of payments the State HFA
made to the mortgage servicer under the
State Program or the SSSP during that year
(separately stating the amount the State
HFA paid and the amount the homeowner
paid). Except as provided in Rev. Proc.
2011–55 regarding use of Form 1098–MA,
the statement the State HFA provides to the
IRS must be a single statement that separately lists the names, TINs, and relevant
payment amounts for each homeowner.
In addition, for calendar years 2011
through 2015, HUD should provide each
homeowner and the IRS a statement setting forth (1) the homeowner’s name and
TIN, and (2) the amount of payments HUD
made to the mortgage servicer under the
EHLP during that year (separately stating
the amount HUD paid and the amount the
homeowner paid). Except as provided in
Rev. Proc. 2011–55, the statement HUD
provides to the IRS should be a single
statement that separately lists the names,
TINs, and relevant payment amounts for
each homeowner.
For calendar years 2011 through 2015,
State HFAs and HUD may, at their option, use Form 1098–MA in accordance
with Rev. Proc. 2011–55 to provide the
information described in Notice 2011–14
instead of filing a single statement for the
calendar year.
State Programs
The State Programs to which Notice 2011–14, Rev. Proc. 2011–55,
and this notice apply are listed at
www.treasury.gov/HHF. This list includes
all of the State Programs that appeared
in the Appendix to Notice 2011–14 as
well as any additional programs that the
Treasury Department has approved for
funding from the HFA Hardest Hit Fund.
EFFECT ON OTHER DOCUMENTS
(1) Notice 2011–14 is amplified by extending the guidance relating to (a) the
safe harbor method for computing a homeowner’s deduction for payments made on
a home mortgage through the taxable year
2015, and (b) information reporting for
those payments through the calendar year
2015. Notice 2011–14 also is amplified
by revising the safe harbor method for
computing a homeowner’s deduction to include mortgage insurance premiums paid
or accrued for years 2012 and 2013.

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(2) Rev. Proc. 2011–55 is amplified
by extending its scope and effective date
through calendar year 2015.
(3) Notice 2011–14 and Rev. Proc.
2011–55 are supplemented by identifying
additional State Programs to which the notice and revenue procedure apply.
DRAFTING INFORMATION
The principal author of this notice is
Shareen S. Pflanz of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice, contact Shareen S. Pflanz
at (202) 622–4920 (not a toll-free call).
26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also Part 1, § 280A.)

Rev. Proc. 2013–13
SECTION 1. PURPOSE
This revenue procedure provides an
optional safe harbor method that individual taxpayers may use to determine the
amount of deductible expenses attributable to certain business use of a residence
during the taxable year. This safe harbor
method is an alternative to the calculation,
allocation, and substantiation of actual
expenses for purposes of satisfying the
requirements of § 280A of the Internal
Revenue Code. This revenue procedure is
effective for taxable years beginning on or
after January 1, 2013.
SECTION 2. BACKGROUND
.01 Section 280A(a) generally disallows any deduction for expenses related
to a dwelling unit that is used as a residence by the taxpayer during the taxable
year. However, § 280A(c)(1) through (4)
allow a deduction for expenses related to
certain business or rental use of a dwelling
unit, subject to the deduction limitation in
§ 280A(c)(5).
.02 Section 280A(c)(1) permits a taxpayer to deduct expenses that are allocable to a portion of the dwelling unit that is
exclusively used on a regular basis (A) as
the taxpayer’s principal place of business
for any trade or business, (B) as a place to
meet with the taxpayer’s patients, clients,

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