Part 7 — Under­stand­ing Your DST Tax Pack­age

DST.EDU Spe­cial Series

Octo­ber 24, 2026

By Al DiNi­co­la, AIF®
Pri­vate Fund Advi­sor
DST 1031 Spe­cial­ist
Fidu­cia­ry Cap­i­tal Man­age­ment, LLC

What Investors and Their CPAs Need to Know About DST Tax Report­ing

One ques­tion I hear from investors is:

“If the DST prop­er­ty has a mort­gage, should I expect a Form 1098 in my name?”

Not nec­es­sar­i­ly.

Form 1098 is com­mon­ly rec­og­nized as the Mort­gage Inter­est State­ment. Many home­own­ers are famil­iar with receiv­ing one from a lender each year. That famil­iar­i­ty can cre­ate con­fu­sion when an investor opens a DST tax pack­age and does not see a tra­di­tion­al Form 1098 addressed direct­ly to the investor.

Here’s the impor­tant part: the mort­gage gen­er­al­ly exists at the prop­er­ty lev­el, while you own a frac­tion­al ben­e­fi­cial inter­est in the DST. Those are relat­ed con­cepts, but they are not the same thing.

Why the Mortgage Is at the Property Level

A DST may own a large com­mer­cial prop­er­ty with sub­stan­tial financ­ing. For exam­ple, assume the prop­er­ty has a $25 mil­lion out­stand­ing mort­gage and the lender received $1,750,000 of mort­gage inter­est dur­ing the year.

An indi­vid­ual DST investor may have an illus­tra­tive mort­gage-inter­est allo­ca­tion of $8,750.

That $8,750 should not be con­fused with the investor per­son­al­ly bor­row­ing $25 mil­lion or mak­ing the property’s mort­gage pay­ments direct­ly to the lender.

The financ­ing belongs to the prop­er­ty-lev­el struc­ture. The investor’s annu­al tax pack­age may then pro­vide infor­ma­tion reflect­ing the amount applic­a­ble to the investor’s inter­est.

This is sim­i­lar to the dis­tinc­tion we dis­cussed in Part 5. Prop­er­ty-lev­el debt can influ­ence the tax infor­ma­tion ulti­mate­ly report­ed to an investor even though the investor did not per­son­al­ly nego­ti­ate or orig­i­nate the mort­gage.

What Does Form 1098 Actually Do?

Form 1098 is an infor­ma­tion-report­ing form used in con­nec­tion with mort­gage inter­est received by a per­son or enti­ty sub­ject to the applic­a­ble report­ing require­ments.

For a tra­di­tion­al home­own­er, the rela­tion­ship is famil­iar: the lender receives mort­gage inter­est from the bor­row­er and may issue a Form 1098.

A DST is dif­fer­ent because the investor is not nec­es­sar­i­ly the bor­row­er shown on the prop­er­ty loan.

Depend­ing on the DST struc­ture and the tax-report­ing method being used, the investor may not receive a tra­di­tion­al Form 1098 in his or her own name. Instead, the investor’s applic­a­ble mort­gage-inter­est infor­ma­tion may appear on a Grantor Trust Tax Infor­ma­tion State­ment, own­er state­ment, sup­ple­men­tal sched­ule, or anoth­er part of the annu­al tax pack­age.

That is why I would not assume some­thing is miss­ing just because a Form 1098 is not includ­ed.

Look for the Mortgage-Interest Allocation

If a tra­di­tion­al Form 1098 does not appear in the pack­age, the next step is not to call the spon­sor and ask, “Where is my 1098?”

A bet­ter ques­tion is:

“Where is my applic­a­ble mort­gage-inter­est infor­ma­tion report­ed in this DST tax pack­age?”

The amount may be clear­ly iden­ti­fied on the Grantor Trust Tax Infor­ma­tion State­ment or on a sup­port­ing sched­ule.

For exam­ple, the pack­age could show:

Prop­er­ty-lev­el mort­gage inter­est: $1,750,000

Out­stand­ing prop­er­ty mort­gage prin­ci­pal: $25,000,000

Investor mort­gage-inter­est allo­ca­tion: $8,750

The first two fig­ures describe the under­ly­ing prop­er­ty and its financ­ing. The $8,750 fig­ure is the amount asso­ci­at­ed with the investor in this sim­pli­fied illus­tra­tion.

Those num­bers should not be treat­ed as inter­change­able.

Do Not Calculate the Deduction Yourself

Anoth­er ques­tion I hear is:

“If I know the property’s total mort­gage inter­est and my own­er­ship per­cent­age, can’t I just cal­cu­late my deduc­tion myself?”

I would not rec­om­mend that.

The annu­al allo­ca­tion may depend on the actu­al invest­ment amount, own­er­ship peri­od, financ­ing struc­ture, spon­sor account­ing records, tax clas­si­fi­ca­tion, and the report­ing method used for the DST.

An investor who owned the DST for only part of the year, for exam­ple, may not have the same allo­ca­tion as an investor who owned the inter­est for the entire year.

The bet­ter approach is to use the tax infor­ma­tion pre­pared for your spe­cif­ic invest­ment and give the entire pack­age to your CPA.

The tax pro­fes­sion­al can then deter­mine whether, where, and to what extent the report­ed amount is deductible on your indi­vid­ual return.

A Tax-Reporting Form Is Not the Same as a Personal Loan Statement

This dis­tinc­tion is worth empha­siz­ing.

See­ing mort­gage-inter­est infor­ma­tion in a DST pack­age does not mean you per­son­al­ly bor­rowed the property’s mort­gage bal­ance.

Like­wise, not receiv­ing a Form 1098 in your own name does not nec­es­sar­i­ly mean mort­gage-inter­est infor­ma­tion is absent.

Think of the prop­er­ty-lev­el mort­gage and the investor-lev­el tax allo­ca­tion as con­nect­ed, but sep­a­rate.

The prop­er­ty has the debt.

The tax pack­age tells you what infor­ma­tion is being report­ed for your inter­est.

That sim­ple dis­tinc­tion can pre­vent a lot of con­fu­sion.

Why the Complete Tax Package Matters

This is anoth­er exam­ple of why I encour­age investors not to pull one famil­iar-look­ing form from the pack­age and ignore every­thing else.

The mort­gage-inter­est infor­ma­tion may appear on a sum­ma­ry state­ment, a sup­ple­men­tal sched­ule, or anoth­er tax doc­u­ment. It may also need to be con­sid­ered togeth­er with rental income, real estate tax­es, oper­at­ing expens­es, and depre­ci­a­tion.

Your CPA needs the com­plete pack­age to under­stand how the pieces fit togeth­er.

If you own sev­er­al DSTs, keep the tax infor­ma­tion for each invest­ment sep­a­rate. A mort­gage-inter­est allo­ca­tion for one prop­er­ty should not acci­den­tal­ly be mixed with the tax pack­age for anoth­er DST.

A Good Question to Ask Your CPA

A use­ful ques­tion is:

“My DST has prop­er­ty-lev­el financ­ing. Where is my applic­a­ble mort­gage-inter­est infor­ma­tion shown in this pack­age, and how does it affect my return?”

That puts the focus where it belongs: on the investor-spe­cif­ic tax report­ing rather than on whether a famil­iar form hap­pened to arrive.

The Bottom Line

Form 1098 is famil­iar to many investors, but DST mort­gage-inter­est report­ing may look dif­fer­ent.

The prop­er­ty may have a sub­stan­tial mort­gage even though the indi­vid­ual investor did not per­son­al­ly orig­i­nate that loan. The investor’s annu­al tax pack­age may pro­vide an applic­a­ble mort­gage-inter­est allo­ca­tion through a Grantor Trust Tax Infor­ma­tion State­ment or sup­port­ing sched­ule rather than a tra­di­tion­al Form 1098 in the investor’s own name.

Do not assume a Form 1098 is miss­ing, and do not recre­ate the allo­ca­tion your­self from prop­er­ty-lev­el fig­ures.

Use the com­plete DST tax pack­age and let your tax pro­fes­sion­al deter­mine how the report­ed mort­gage-inter­est infor­ma­tion applies to your indi­vid­ual return.

Investor/CPA Takeaway

Think of prop­er­ty-lev­el mort­gage infor­ma­tion and the investor’s mort­gage-inter­est allo­ca­tion as relat­ed, but not nec­es­sar­i­ly iden­ti­cal, report­ing con­cepts. The com­plete DST tax pack­age should deter­mine what is pro­vid­ed to the CPA.

In Part 8 of our DST.EDU series, we will look at:

Sam­ple Forms 1099-INT and 1099-MISC: When They May Appear in DST Report­ing.

References

Inter­nal Rev­enue Ser­vice. Form 1098, Mort­gage Inter­est State­ment, and relat­ed instruc­tions.

Educational Note

This arti­cle is intend­ed sole­ly for gen­er­al edu­ca­tion­al and infor­ma­tion­al pur­pos­es. It is not indi­vid­ual tax, legal, secu­ri­ties, or invest­ment advice. DST tax report­ing can vary by invest­ment, spon­sor, prop­er­ty, financ­ing, report­ing method, and investor cir­cum­stances. Investors should pro­vide their com­plete DST tax pack­age to their CPA or oth­er qual­i­fied tax pro­fes­sion­al and obtain advice based on their indi­vid­ual sit­u­a­tion.

Delaware Statu­to­ry Trusts (DSTs) have become a notable part of com­mer­cial real estate invest­ing. As Al DiNi­co­la empha­sizes, a DST is a struc­ture, not an asset class, the focus should remain on the qual­i­ty of the under­ly­ing prop­er­ty and how it fits your goals.  DSTs are for accred­it­ed investors and car­ry risks, i.e. illiq­uid­i­ty, real estate mar­ket fluc­tu­a­tions, and spon­sor deci­sions. Con­sult your advis­er about suit­abil­i­ty, espe­cial­ly for §1031 exchanges. For more details, please con­tact:

• Al DiNi­co­la adnicola@fiduciarycm.com  
• Direct: 239 691 8098
• Sched­ule Appoint­ment

Advi­so­ry ser­vices are offered through Fidu­cia­ry CM, an SEC-reg­is­tered advis­er. Invest­ments involve risk and are not guar­an­teed. Always refer to offer­ing doc­u­ments for full risk dis­clo­sures. Delaware Statu­to­ry Trust (DST) invest­ments involve risks asso­ci­at­ed with com­mer­cial real estate own­er­ship and are not suit­able for all investors. These risks may include, but are not lim­it­ed to, loss of prin­ci­pal, illiq­uid­i­ty, ten­ant vacan­cy, financ­ing risk, inter­est rate fluc­tu­a­tions, prop­er­ty val­ue declines, eco­nom­ic and mar­ket con­di­tions, and risks asso­ci­at­ed with spon­sor and prop­er­ty man­age­ment deci­sions. Please refer to the applic­a­ble Prop­er­ty Pri­vate Place­ment Mem­o­ran­dum (PPM) for a com­plete dis­cus­sion of the risks and con­sid­er­a­tions spe­cif­ic to that offer­ing. Secu­ri­ties-relat­ed activ­i­ties, where applic­a­ble, are con­duct­ed through the author’s then-cur­rent reg­is­tered bro­ker-deal­er, mem­ber FINRA/SIPC. Cur­rent reg­is­tra­tion infor­ma­tion is avail­able through FINRA Bro­kerCheck. Past per­for­mance is not indica­tive of future results. Nei­ther the Reg­is­tered Rep­re­sen­ta­tive nor the Bro­ker-Deal­er can con­trol or guar­an­tee future deci­sions made by the DST spon­sor, asset man­ag­er, prop­er­ty man­ag­er, ten­ants, lenders, or oth­er third par­ties involved in the oper­a­tion of the prop­er­ty. Past per­for­mance is not indica­tive of future results. For edu­ca­tion­al pur­pos­es only; not tax, legal, secu­ri­ties, or invest­ment advice and not an offer or solic­i­ta­tion to buy or sell secu­ri­ties.