Do I Need My Mortgage Statement for Taxes?

When tax season arrives, homeowners often wonder which documents are necessary for filing their annual returns. A common question revolves around whether a monthly mortgage statement is needed for tax purposes. Understanding the specific forms and information required can help ensure accurate tax preparation and allow for valuable deductions.

The Key Tax Document

The primary document for mortgage-related tax purposes is Form 1098, Mortgage Interest Statement. Your mortgage lender or servicer issues this form, providing an annual summary of payments. Lenders are generally required to issue a Form 1098 if they received $600 or more in mortgage interest from you during the calendar year. This form aggregates annual figures for specific tax-deductible items.

Form 1098 reports total mortgage interest, points paid on a principal residence, and potentially mortgage insurance premiums. Monthly mortgage statements detail payments but do not consolidate these annual figures in the format required by the Internal Revenue Service (IRS). Relying solely on monthly statements for tax purposes would require manually totaling amounts, which can be time-consuming and prone to error.

Deductible Mortgage-Related Expenses

Several mortgage-related expenses can be deductible for homeowners who choose to itemize their deductions on Schedule A (Form 1040). The most common deduction is for mortgage interest, which is reported in Box 1 of Form 1098. For mortgages taken out after December 15, 2017, the deduction is limited to interest paid on up to $750,000 of mortgage debt ($375,000 if married filing separately) for a primary or secondary home. For mortgages obtained before December 16, 2017, higher limits of up to $1 million ($500,000 if married filing separately) apply.

Points, also known as loan origination fees or discount points, are essentially prepaid interest. These are typically reported in Box 6 of Form 1098. Generally, points must be deducted over the life of the loan. However, points paid for a mortgage used to buy or build your main home can often be fully deducted in the year they were paid, provided certain conditions are met.

Mortgage insurance premiums (MIP), sometimes referred to as private mortgage insurance (PMI), are not deductible for current tax filings. Property taxes are another significant deductible expense, although they are not reported on Form 1098. If you pay property taxes through an escrow account, the amount paid will be detailed on your annual escrow statement. If paid directly, you would use your personal payment records. The deduction for state and local taxes, including property taxes, is limited to $10,000 per household ($5,000 if married filing separately).

What to Do Without a Form 1098

There are situations where a taxpayer might not receive a Form 1098, or the form might be lost. Lenders are only required to issue a Form 1098 if the mortgage interest received from the borrower is $600 or more during the tax year. If the total interest paid is less than $600, a Form 1098 may not be sent, but the interest is still potentially deductible if you itemize.

If you did not receive a Form 1098 or need a replacement, contact your mortgage servicer directly. Most servicers can provide a copy of the form or an annual statement detailing the interest paid. Many mortgage servicers also offer online account access where you can view and print your tax forms. If a Form 1098 was not issued because the interest paid was below the $600 threshold, you can still deduct the qualifying interest by gathering information from your monthly mortgage statements and totaling the annual amount. It is important to maintain accurate records of all mortgage payments and related expenses.

Reporting Mortgage Information on Your Tax Return

Once you have gathered all the necessary mortgage-related figures, primarily from Form 1098 and annual escrow statements, you will report this information on Schedule A (Form 1040), Itemized Deductions. This schedule is used by taxpayers who choose to itemize their deductions rather than taking the standard deduction.

Mortgage interest reported in Box 1 of Form 1098 is typically entered on line 8a of Schedule A. Any deductible points not fully reported on Form 1098, such as those paid by the seller, would be listed on line 8c. Real estate taxes are reported on line 5b of Schedule A. After completing Schedule A, the total itemized deductions are then compared to the standard deduction, and the higher amount is transferred to your Form 1040, reducing your taxable income. It is advisable to keep all supporting documents, such as your Form 1098 and annual escrow statements, with your tax records for at least three years in case the IRS has questions.