Title: What Is Form 1098 (Mortgage Interest Statement)? — A Practical Guide
Overview
Form 1098, Mortgage Interest Statement, is the form your lender sends to you and the IRS if you paid $600 or more in mortgage interest during the year. It’s the key document many taxpayers use to claim the mortgage interest deduction when they itemize deductions on their federal income tax return.
Key takeaways
– Lenders must send Form 1098 to borrowers and to the IRS when mortgage interest of $600+ was paid in the year (you may still deduct interest even if no 1098 was issued). (IRS; Investopedia)
– Form 1098 shows mortgage interest paid, mortgage points paid (if any), lender and borrower information, and usually the property address and loan details. (IRS; Investopedia)
– To deduct mortgage interest you must itemize (Schedule A, Form 1040) and meet IRS rules and dollar limits established by the Tax Cuts and Jobs Act (TCJA). (IRS Publication 936; Investopedia)
What is included on Form 1098
Typical information reported to you and the IRS includes:
– Mortgage interest you paid to the lender during the year
– Points you paid to obtain the mortgage (if applicable)
– Property address and loan identification
– Lender (recipient) and borrower (payer) names and addresses
– Often the outstanding mortgage principal and origination date
(Exact boxes and formatting are set by the IRS; see the IRS Form 1098 instructions.) (IRS)
Who receives Form 1098?
– The primary borrower(s) on the mortgage who paid $600 or more in mortgage interest generally receive a Form 1098. (If you paid less than $600 you may not receive a 1098 but could still have a deductible amount if you have records.) (IRS; Investopedia)
– If you have multiple mortgages with different lenders, you’ll receive a separate Form 1098 from each lender reporting the amounts they received. (Investopedia)
Rules for deducting mortgage interest (practical summary)
1. You must itemize:
– Mortgage interest is deductible only if you itemize deductions on Schedule A (Form 1040). If the standard deduction is larger, you won’t claim the mortgage interest separately. (IRS Publication 936)
2. Qualifying debt:
– Interest on acquisition debt used to buy, build, or substantially improve your primary or a second home can be deductible. Home equity interest is deductible only in limited situations (generally only if the funds were used to buy/construct/improve the home that secures the loan). (IRS Publication 936)
3. Dollar limits (TCJA rules):
– For acquisition debt incurred on or after Dec. 15, 2017, interest is deductible on up to $750,000 of mortgage debt for married filing jointly ($375,000 if married filing separately).
– For acquisition debt incurred before Dec. 15, 2017, the old limit ($1,000,000; $500,000 MFS) generally still applies.
– These limits apply to the combined amount of acquisition debt on your primary and second home. (IRS Publication 936; Tax Foundation summary)
4. Refinancing:
– Debt that refinances prior acquisition debt generally keeps the original acquisition date for limit purposes for the amount of the refinance that equals the old loan principal; additional funds may be treated differently. (IRS Publication 936)
5. Second homes:
– Interest on mortgages for a qualified second home can be deductible subject to the combined limits. (IRS Publication 936)
How to claim a mortgage interest deduction — step-by-step
1. Collect documents:
– Gather all Form 1098(s) from lenders, closing statements (HUD-1 or Closing Disclosure) for mortgages and refinances, year-end mortgage statements, and records of loan proceeds if the loan was refinanced or used for improvements. (IRS Publication 936)
2. Decide itemize vs. standard deduction:
– Compare total potential itemized deductions (mortgage interest, state/local taxes subject to SALT limits, charitable gifts, medical expense deductions where applicable) to the standard deduction for your filing status. (IRS)
3. Calculate allowable interest:
– Use Form 1098 amounts as the starting point for mortgage interest paid. Adjust as needed for amounts not reported on 1098 (e.g., prepaid interest at closing, deductible points, interest for periods not reported). If you paid interest but didn’t receive a 1098, keep documentation and include the appropriate amount on Schedule A. (IRS Publication 936)
4. Handle points:
– If you paid points to buy a primary residence, you may be able to deduct them in full in the year paid if you meet IRS tests (points paid were customary, paid to acquire the principal residence, not for repayment of interest, and you have a settlement statement documenting them). Otherwise points generally must be amortized over the life of the loan. See “Mortgage points” below and IRS Topic No. 504. (IRS; Investopedia)
5. Fill out Schedule A (Form 1040):
– Report mortgage interest on the appropriate line(s) of Schedule A using your calculations. You do not attach Form 1098 to your return for most years, but keep the form in your records. (IRS)
6. Keep records:
– Retain Form 1098(s), closing disclosures, promissory notes, escrow statements, and other documentation for at least three years (longer if you have special circumstances). The IRS recommends keeping supporting documents in case of an audit. (IRS Publication 936)
7. If something is wrong or you didn’t get a form:
– Contact your lender to request a corrected Form 1098 or an explanation. If the lender fails to provide a corrected form and you believe your reported interest is correct, keep your records and be prepared to explain. You may also contact the IRS for guidance. (IRS; Investopedia)
Mortgage points (practical notes)
– “Points” are prepaid interest you can pay at closing to reduce your mortgage rate. They may be deductible:
– In full in the year paid when they are “points” as defined by the IRS, paid in connection with purchase of your principal residence, and meet several IRS tests (documented on the settlement statement, paid to buy the principal residence, and not for services). (IRS Topic No. 504)
– If points are for a refinance, they typically must be amortized (deducted) over the life of the refinanced loan unless special exceptions apply.
– Check Form 1098 for a box showing points paid; that helps but doesn’t guarantee deductibility — you must meet IRS rules. (IRS Topic No. 504; Investopedia)
Other 1098 forms (brief)
– Form 1098-C: Reports donations of motor vehicles, boats, or airplanes to charities (used when the vehicle’s value is > $500). (IRS)
– Form 1098-E: Reports student loan interest of $600+ paid to loan servicers; may enable a student loan interest deduction. (Federal Student Aid; IRS)
– Form 1098-T: Tuition statement from educational institutions for qualifying tuition and related expenses; used to claim education credits like the AOTC or Lifetime Learning Credit. (IRS)
– Form 1098-MA: Reports mortgage assistance payments under programs (e.g., certain state housing programs); affects deductible mortgage interest calculations when assistance was received. (IRS; Investopedia)
If the numbers on Form 1098 don’t match your records
– Compare the 1098 to your monthly mortgage statements and to the closing disclosure (if in the first year). If incorrect, ask the lender to issue a corrected Form 1098. Do not throw out your records — you’ll need them if the IRS questions the return. (IRS)
Practical examples (high level)
– Example A: You paid $7,200 in mortgage interest in 2024, and the rest of your itemized deductions total $3,000, exceeding the standard deduction for your filing status — you would include the $7,200 on Schedule A to reduce taxable income, subject to mortgage deduction limits and qualification rules.
– Example B: You paid $4,000 mortgage interest but the standard deduction for your filing status is $13,850 (single, 2024); you would likely take the standard deduction instead of itemizing, so the 1098 has informational value but no tax benefit in that year.
Bottom line
Form 1098 is the primary lender-provided document showing mortgage interest and points paid during the year. Use it with your closing statements and mortgage records to determine whether you should itemize and how much mortgage interest you can deduct. Follow IRS rules about qualifying debt, dollar limits created by the TCJA, and special rules for points and refinances. Keep all supporting documents in case of IRS questions.
Sources and further reading
– Investopedia: “Form 1098” (source summary provided)
– IRS: About Form 1098, Mortgage Interest Statement — https://www.irs.gov/forms-pubs/about-form-1098
– IRS: Instructions for Form 1098 (annual instructions)
– IRS Publication 936 (2024), Home Mortgage Interest Deduction — https://www.irs.gov/forms-pubs/about-publication-936
– IRS Topic No. 504, Home mortgage points — https://www.irs.gov/taxtopics/tc504
– IRS: About Form 1098-C, 1098-E, 1098-T, 1098-MA pages
If you’d like, I can:
– Walk through an example with your numbers to estimate whether itemizing will help you.
– Show how to enter mortgage interest on Schedule A step by step.
– Explain how a refinance would affect your deduction limit in a specific scenario.