What Is Form 1098: Mortgage Interest Statement?
Let me explain Form 1098 directly to you—it's a tax document you'll get as a homeowner if you've paid $600 or more in mortgage interest during the year. Your lender sends it to you so you can use it when filing your annual taxes.
This form includes key details like your name and taxpayer identification number (TIN), your address, your lender's name and TIN, their address, the number of properties securing the mortgage, the amount of mortgage interest you paid, the outstanding mortgage principal, any refund of overpaid interest, mortgage insurance premiums, and points paid on the purchase of your principal residence.
Key Takeaways
Understand that Form 1098 is a tax form outlining the interest, insurance premiums, and points you've paid on your mortgage. Lenders send it to you and the IRS. If you receive one, you can potentially deduct that mortgage interest on your yearly taxes. Remember, there are other 1098 forms for things like student loan interest or tuition payments that report tax-deductible amounts.
Who Receives Form 1098?
Mortgage lenders send Form 1098 to the IRS and a copy to you as the primary borrower. They do this if you've paid $600 or more in interest; if it's less, you might not get one. If you have multiple mortgages, expect a separate Form 1098 for each.
Rules for Deducting Mortgage Interest
The IRS sets specific rules for deducting mortgage interest, so pay attention. Your home must qualify— it has to be your main residence or a second home with sleeping, cooking, and bathroom facilities. The mortgage needs to be a secured debt. You can deduct interest on the first $750,000 of your mortgage, or $375,000 if married filing separately. For mortgages before December 16, 2017, the limits are $1 million and $500,000 respectively.
Note that the Tax Cuts and Jobs Act of 2017 adjusted the maximum mortgage amount for interest deductions.
How To Claim a Mortgage Interest Deduction
If you're claiming your mortgage interest as a deduction, start by verifying the accuracy of the Form 1098 from your lender. Look in Box 1 for the interest amount paid. You'll file this on Form 1040 or 1040-SR, reporting all itemized deductions on Schedule A, specifically line 8a for mortgage interest.
On mortgage points—these are fees paid to lower your interest rate, and they're listed on Form 1098 too. You might deduct them. Choose between itemized deductions and the standard deduction; if itemizing, including mortgage interest, lowers your taxable income more, go with that to save on taxes.
Other 1098 Tax Forms
Beyond the mortgage interest statement, there are several other 1098 forms, each tied to specific tax deductions. Let me break them down for you.
Form 1098-C
This form covers donations of motor vehicles, boats, or airplanes. If you donate a qualified vehicle worth more than $500, the receiving charity files Form 1098-C with the IRS, and you get a copy to potentially claim a deduction.
Form 1098-E
Student loan servicers send Form 1098-E to borrowers who've paid $600 or more in interest, with a copy to the IRS. You can use it to deduct some of that interest on your taxes.
Form 1098-T
Educational institutions file Form 1098-T for students who've paid qualified tuition and expenses, sending copies to the IRS and the student. Use this to claim education tax credits like the American Opportunity Tax Credit or Lifetime Learning Credit.
Form 1098-MA
This form reports mortgage assistance payments from the HFA Hardest Hit Fund. It helps you figure out how much mortgage interest remains deductible after receiving such assistance.
The Bottom Line
As a homeowner, if you've paid mortgage interest or points, you might claim a tax deduction using Form 1098 from your lender. Follow IRS rules precisely for this. Other 1098 forms could give you more itemized deductions on your taxes.
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