What Is a Mortgage Interest Statement?

Form 1098, an informational tax document issued by mortgage lenders, reports the total mortgage interest and other financial details paid by a borrower during a tax year. It helps taxpayers prepare federal income tax returns and claim eligible home mortgage tax deductions.

Understanding the Information on Form 1098

Form 1098 provides a detailed breakdown of mortgage-related payments. Lenders are required to issue this form if $600 or more in mortgage interest was paid during the year.

Box 1 on Form 1098 shows the total mortgage interest received from the borrower during the calendar year. This amount includes interest paid on the primary mortgage, and potentially on home equity loans or lines of credit if they are secured by the home. Box 2 indicates the outstanding mortgage principal as of January 1 of the tax year. This figure represents the remaining balance of the loan at the beginning of the reporting period.

Box 3 details the mortgage origination date, which is the date the loan was initially taken out. This date can be important for determining the applicable limits on mortgage interest deductibility. Box 4 reports any refund of overpaid interest that the lender issued to the borrower during the year. This amount can affect the mortgage interest deduction claimed on a tax return.

Box 5 shows the total amount of mortgage insurance premiums paid during the year. While historically deductible, this deduction has expired for most recent tax years. Box 6 reports points paid on the purchase of a principal residence. Points are prepaid interest and are generally deductible, often in the year paid if certain conditions are met.

Box 7 is checked if the property’s address is the payer’s home address or if Box 8 is filled. Box 8 contains the address or a description of the property securing the mortgage, which helps distinguish it from other properties. Finally, Box 9 is often left blank but can be used by the lender to provide other relevant information to the borrower, such as real estate taxes or insurance paid from escrow.

Utilizing Form 1098 for Tax Deductions

Form 1098 information is used to claim tax deductions, which can reduce an individual’s taxable income. The mortgage interest deduction is claimed on Schedule A (Form 1040), Itemized Deductions. To claim this deduction, a taxpayer’s total itemized deductions must exceed the standard deduction for their filing status.

For loans taken out after December 15, 2017, the deduction for mortgage interest is limited to interest paid on up to $750,000 of qualified residence debt ($375,000 if married filing separately). Higher limits apply for indebtedness incurred before this date, allowing interest deduction on up to $1 million ($500,000 if married filing separately). A qualified residence includes a taxpayer’s main home and one other home, provided it has sleeping, cooking, and toilet facilities.

Points paid on the purchase of a principal residence, reported in Box 6, can often be deducted in the year they were paid if specific conditions are met. These conditions include the loan being secured by the main home, the payment of points being an established business practice in the area, and the points not exceeding the generally charged amount. If these conditions are not met, or if the loan is a refinance or for a second home, points are generally deducted ratably over the life of the loan.

Interest on home equity loans or lines of credit (HELOCs) is deductible only if funds are used to buy, build, or substantially improve the secured home. This requirement, established by the Tax Cuts and Jobs Act of 2017, expires after 2025. Mortgage insurance premiums (MIP or PMI), reported in Box 5, are not deductible for tax years after 2021, as the allowing tax law expired.

Receiving and Addressing Issues with Form 1098

Mortgage lenders issue Form 1098. Borrowers should expect to receive it by January 31st of the year following the tax year. Many lenders also make the form available electronically through their online mortgage portals.

If a Form 1098 is not received by early February, borrowers should contact their mortgage servicer directly to request a copy. Even if less than $600 in mortgage interest was paid, and a lender is not obligated to send the form, a borrower may still request it to verify interest paid for tax purposes. It is important to ensure the information on the form is accurate, as it directly impacts tax reporting.

If information on Form 1098 appears incorrect, borrowers must contact their lender to dispute the error. The lender can then issue a corrected Form 1098, important for accurate tax filing.