Your Guide to Form 1098: Mortgage Interest Statement

Form 1098 is essential for homeowners, providing crucial information about mortgage interest paid during the tax year. This guide will explain how to read and utilize this form effectively, ensuring you maximize your tax benefits.
By Jamie

What is Form 1098?

Form 1098, also known as the Mortgage Interest Statement, is used by lenders to report mortgage interest of $600 or more paid by a borrower in a given tax year. Homeowners receive this form from their mortgage lender, and it’s vital for accurate tax reporting.

Key Sections of Form 1098

To better understand Form 1098, let’s break down its key sections:

  • Borrower’s Information: This section contains the name, address, and taxpayer identification number (usually the Social Security Number) of the borrower.
  • Lender’s Information: Here, you will find the lender’s name, address, and identification number.
  • Mortgage Interest Received: This box shows the total amount of mortgage interest received from the borrower during the year.
  • Points Paid: If you paid points to lower your interest rate, this section will detail that amount, which may be deductible.
  • Refund of Overpaid Interest: This box will show any refund of interest that was previously reported.

Example of Form 1098

Here’s a simplified example of how a completed Form 1098 might look:

Box Number Description Amount
1 Mortgage Interest Received $8,000
2 Points Paid $1,000
3 Refund of Overpaid Interest $200
4 Mortgage Origination Date 01/15/2020

How to Use Form 1098 for Your Taxes

When you receive Form 1098, you should:

  1. Check for Accuracy: Ensure that all personal information and amounts are correct.
  2. Report Mortgage Interest: Use the amount in Box 1 on your tax return (Schedule A for itemized deductions).
  3. Deduct Points: If you paid points, they may be deductible in the year paid or over the life of the mortgage, depending on specific conditions.
  4. Keep Records: Maintain a copy of Form 1098 for your records, as you may need it for future tax filings or audits.

Conclusion

Understanding Form 1098 is crucial for homeowners who want to accurately report mortgage interest on their tax returns. By following the examples provided, you can ensure that you maximize your deductions and file your taxes correctly.