What to Know About Form 1098 for Your Taxes

The Form 1098 series includes several informational returns filed with the Internal Revenue Service (IRS) by businesses to which you have made certain types of payments throughout the year. Their purpose is to provide you and the IRS with a record of these payments for when you file your federal income tax return.

Receiving a Form 1098 is a signal that you may be able to lower your tax bill. The information reported on these forms is directly linked to specific tax deductions and credits that can reduce your taxable income or the amount of tax you owe. Understanding what these forms are for and how to use them is a key part of taking advantage of the tax benefits for which you may be eligible.

Understanding Your Form 1098 Mortgage Interest Statement

For homeowners with a mortgage, Form 1098, Mortgage Interest Statement, is a document received early each year. Your mortgage lender or loan servicer is required to send this form to you by January 31 if you paid $600 or more in mortgage interest during the previous year. This form provides a summary of financial information related to your home loan that is reported to the IRS.

The most prominent figure on the form is in Box 1, which shows the total mortgage interest you paid during the year. Another field, Box 2, lists the outstanding principal on your mortgage at the start of the year. For those who purchased a home during the year, Box 6 reports the amount of points you paid. These points, which are a form of prepaid interest, can sometimes be deducted in the year they were paid.

Claiming the Mortgage Interest Deduction

The information on Form 1098 is used to claim the home mortgage interest deduction, a benefit that requires you to itemize deductions on your tax return. This means forgoing the standard deduction, so it is a choice that makes sense only if your total itemized deductions exceed the standard deduction amount for your filing status.

To claim the deduction, you will transfer the figures from your Form 1098 to Schedule A. The amount from Box 1 of your Form 1098 is entered on line 8a of Schedule A. The deduction is limited to the interest paid on up to $750,000 of mortgage debt for married couples filing jointly, or $375,000 for single filers.

Any deductible points from Box 6 are also reported on Schedule A. The rules for deducting points can vary; points paid when you first purchase your main home are often fully deductible in that year.

Using Form 1098-T for Education Credits

When students or their parents pay for higher education, they often receive Form 1098-T, Tuition Statement, from the eligible educational institution. This form is issued by colleges and universities to report qualified tuition and related expenses. It serves as the foundational document for claiming education-related tax credits, which can be more beneficial than deductions because they directly reduce the amount of tax owed.

Box 1 shows the total amount of payments the institution received from you for qualified tuition and related expenses. Taxpayers use the figures from Form 1098-T to complete Form 8863, Education Credits. The American Opportunity Tax Credit (AOTC) is available for the first four years of postsecondary education, offering a maximum annual credit of $2,500 per eligible student, while the LLC is broader and can be used for undergraduate, graduate, and professional degree courses.

Reporting Student Loan Interest with Form 1098-E

For individuals repaying student loans, Form 1098-E, Student Loan Interest Statement, is an important tax document. Your loan servicer will send you this form if you paid $600 or more in interest on a qualified student loan during the year. Box 1 reports the total interest you paid.

This figure is used to claim the student loan interest deduction on Schedule 1 of Form 1040. This is an “above-the-line” deduction, meaning you do not need to itemize to claim it. You can deduct the lesser of the amount of interest you actually paid or $2,500. This deduction directly reduces your adjusted gross income (AGI).

Your ability to claim the full deduction is phased out, or gradually reduced, once your modified adjusted gross income (MAGI) reaches a certain level. For the 2024 tax year, the phase-out begins for single filers with a MAGI between $80,000 and $95,000 and for joint filers with a MAGI between $165,000 and $195,000. If your MAGI is above these ranges, you cannot claim the deduction.

Common Issues and Form Corrections

If you were expecting a form but did not receive one by early February, the first step is to check the online portal of your lender or educational institution, as many make these documents available electronically. Keep in mind that a form is not always required; if you paid less than $600 in mortgage or student loan interest, the provider is not obligated to send one.

If you receive a form that you believe contains an error, such as an incorrect interest amount or a misspelled name, you should contact the issuer directly. They can review their records and, if necessary, issue a corrected Form 1098, which will be clearly marked as “CORRECTED” and sent to both you and the IRS.