Form 1098: Mortgage Interest Statement and How to File

What Is Form 1098: Mortgage Interest Statement?

Form 1098: Mortgage Interest Statement is an Internal Revenue Service (IRS) form that is used by taxpayers to report the amount of interest and related expenses paid on a mortgage during the tax year when the amount totals $600 or more. Related expenses include points paid on the purchase of the property. Points refer to prepaid interest made on a home loan to improve the rate on the mortgage offered by the lending institution.

Form 1098 serves two purposes:

• Lenders use it to report interest payments in excess of $600 they received for the year. The IRS collects this information to ensure proper financial reporting for lenders and other entities that receive interest payments.
• Homeowners use it to determine the total amount of interest they paid for the year when figuring their mortgage interest deduction for their annual tax returns.

Who Can File Form 1098: Mortgage Interest Statement?

If you paid $600 or more for the previous year in interest and points on a mortgage, your lender is required to send Form 1098 to you. If you paid less than $600, you will not receive Form 1098. These expenses can be used as deductions on a federal income tax form, Schedule A, which reduces taxable income and the overall amount owed to the IRS. Form 1098 is issued and mailed by the lender—or other entity receiving the interest—to you, the borrower.

The mortgage lender is required by the IRS to provide Form 1098 to you if your property is considered real property. Real property is land and anything that is built on, grown on, or attached to the land.

The property for which the mortgage interest payments must meet IRS standards, which define home as a space that has basic living amenities: cooking and bathroom facilities and a sleeping area. Houses, condominiums, mobile homes, boats, cooperatives, and house trailers all qualify as a home according to the IRS.

Also, the mortgage itself must be qualified. According to the IRS, qualified mortgages include first and second mortgages, home equity loans, and refinanced mortgages.

Rules for Deducting Mortgage Interest

Whether or not you need Form 1098 depends on whether or not you plan to itemize your deductions on the Schedule A Form. Claiming a deduction for mortgage interest paid when can reduce your total taxable income. However, there are a few rules to know about deducting mortgage interest.

• You must be the primary borrower and be making payments on the loan.
• You’re limited to deducting interest on total mortgage debt of $750,000 or less, if the debt originated on or after Dec. 16, 2017. (The limit for older mortgage debt is $1 million.)

If all of these apply to you, then you would need Form 1098 to deduct the mortgage interest you paid for your home loan for the current tax year. If you have more than one qualified mortgage, then you will receive a separate Form 1098 for each one.

All copies of Form 1098 are available on the IRS website.

How to File Form 1098: Mortgage Interest Deduction

Taxpayers don't need to actually include Form 1098 with their tax returns because the information included in the form has already been provided to the IRS. Rather, taxpayers use the information provided on Form 1098 if they plan to deduct their mortgage payments. If you're planning to file your tax return electronically, you enter the information from the form into the appropriate boxes on your tax return to record your interest deduction information.

If you're receiving a Form 1098 for the first time, you may wonder how to make sense of it. There are 11 boxes to take note of when reviewing your statement.

• Box 1: Mortgage interest received from the borrower. This box shows how much interest you paid to your lender for the year.
• Box 2: Outstanding mortgage principal. This box shows how much is owed on the principal of the loan.
• Box 3: Mortgage origination date. This shows the date when your mortgage originated.
• Box 4: Refund of overpaid interest. If you overpaid mortgage interest that was refunded, it would be listed here.
• Box 5: Mortgage insurance premiums. If you're paying private mortgage insurance or mortgage insurance premiums for the loan, those amounts are entered here.
• Box 6: Points paid on the purchase of the principal residence. This box shows mortgage points you may be able to deduct.
• Boxes 7 through 11. These include information about the mortgage and the property itself.

When reviewing Form 1098, it's important to verify that all of your personal information, including your name, address, and tax identification number, is accurate.

Other 1098 Tax Forms

Form 1098: Mortgage Interest Deduction is one of four forms that includes the number 1098. All 1098 forms are related to deductions. The three other versions of Form 1098 are Form 1098-C, Form 1098-E, and Form 1098-T.

Form 1098-C

Form 1098-C details the donations of automobiles, boats, and airplanes to charitable organizations that give the vehicles to the needy or sell them at a below-market price. It is filed and reported by the recipient organization and includes the date of donation, type of vehicle, vehicle identification number (VIN), and value of the vehicle.

Form 1098-E

Form 1098-E reports the interest paid on qualified student loans during the tax year. The interest paid can be deducted by the taxpayer, who will receive the form detailing how much interest was paid that year. It is sent by the lending institution if at least $600 was paid in interest, although the taxpayer may get a form for sums less than $600.

Form 1098-T

Form 1098-T provides information about post-secondary tuition and related fees during the year. It is filed by the educational institution and can be used to calculate education-related tax deductions and credits, such as the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). The form also reports any scholarships and grants received through the school that may reduce the taxpayer’s allowable deduction or credit.

1098 Form FAQs