Form 1098 Definition – Mortgage Advice

Table of Contents

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• What Is Form 1098?

• Who Needs Form 1098?

• What Is Form 1098 Used For?

• How to Fill Out and Read Form 1098

• Where to Get Form 1098

• Can Form 1098 Be E-Filed?

• Where to Mail Form 1098

• Other Types of Form 1098

What Is Form 1098?

Form 1098, Mortgage Interest Statement, is an Internal Revenue Service (IRS) form that’s used to report the amount of interest and related expenses paid on a mortgage during the tax year by an individual or a sole proprietor when the amount totals $600 or more. “Related expenses” include points paid on the purchase of the property. Points refer to interest paid in advance or simply prepaid interest made on a home loan to improve the rate on the mortgage offered by the lending institution. Interest payments made by a trust, estate, corporation, or partnership do not need to be filed.

In other words, if you paid $600 or more for the previous year in interest and points on a mortgage, your lender is required to send this form to you. If you paid less than $600, you wouldn’t receive a Form 1098. These expenses can be used as deductions on a U.S. 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. 

Key Takeaways:

• Form 1098 is used to report mortgage interest paid for the year.
• This form must be issued by lenders when a homeowner’s mortgage interest paid is $600 or more.
• You need Form 1098 when filing taxes if you plan to claim a mortgage interest deduction.

Who Needs Form 1098?

The mortgage lender is required by the IRS to provide Form 1098 to you if your property is considered real property, which is land and anything that is built on, grown on, or attached to the land. The home for which the mortgage interest payments are made must be qualified by IRS standards, which define a home as a space that has basic living amenities: cooking and bathroom facilities and a sleeping area. Examples include a house, condominium, mobile home, boat, cooperative, and house trailer. Also, the mortgage itself must be qualified. According to the IRS, qualified mortgages include first and second mortgages, home equity loans, and refinanced mortgages.

Whether you need Form 1098 depends largely on whether you plan to claim a deduction for mortgage interest paid on your taxes. 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.)
• You must itemize your deductions on Schedule A to claim the deduction.

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.

What Is Form 1098 Used For?

Form 1098 serves two purposes. First, it requires lenders to report interest payments in excess of $600 they received for the year. The IRS uses this information to ensure proper financial reporting for lenders and other entities that receive interest payments of $600 or more.

Second, this statement is used by homeowners to determine how much interest they paid for the year when figuring their mortgage interest deduction. That’s important for ensuring accuracy in filing your tax return and getting the full tax break you’re allowed when deducting interest paid on your home loan.

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

How to Fill Out and Read Form 1098

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 purchase of 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 double check your personal information, including your name, address, and tax identification number, to make sure that it’s correct.

Where to Get Form 1098

If you’re a homeowner, your lender should mail this form to you whenever your interest paid for the year is more than $600. A blank copy of Form 1098 can be downloaded from the IRS website.

Can Form 1098 Be E-Filed?

Taxpayers don't need to file form 1098, just use the information 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.

Where to Mail Form 1098

Again, taxpayers don't have to mail form 1098 anywhere; lenders mail Form 1098 to individual homeowners while transmitting an electronic copy to the IRS. If you’re a taxpayer and plan to file a paper return, you do not need to attach Form 1098, as that information has already been provided to the IRS.

Other Types of Form 1098

Form 1098 is one of four forms with the number 1098 on it. All deal with deductions. The three other versions of Form 1098 are:

1. 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.

2. 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.

3. 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.