Where Do I Put Form 1098 on My Tax Return?

Form 1098, also known as the Mortgage Interest Statement, is sent by lenders to homeowners who paid at least $600 in mortgage interest during the year. This document helps determine potential deductions that can lower taxable income, making it essential for many taxpayers.

Accurately reporting the information from Form 1098 ensures eligible deductions are claimed while avoiding errors that could trigger IRS scrutiny. Knowing where to input this data on a tax return is key to maximizing benefits.

Mortgage Interest on Schedule A

Mortgage interest is reported on Schedule A of Form 1040, which is used to itemize deductions. This deduction is available only to those who itemize instead of taking the standard deduction. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly, meaning itemizing is beneficial only if total deductions exceed these amounts.

The mortgage interest deduction applies to loans up to $750,000 ($375,000 for married filing separately) if the loan was used to buy, build, or improve a primary or secondary home. Loans taken before December 16, 2017, are subject to the previous $1 million limit. If a mortgage exceeds these thresholds, only a portion of the interest is deductible, requiring a proration calculation.

Schedule A requires entering the mortgage interest amount from Box 1 of Form 1098. If multiple 1098 forms are received due to refinancing or multiple properties, each must be reported separately. The IRS cross-checks reported interest with lender filings, so accuracy is crucial.

Reporting Points

Lenders report mortgage interest payments to the IRS, so discrepancies between Form 1098 and a taxpayer’s claim can raise red flags. Ensuring the reported amount matches the form exactly helps prevent audits or IRS inquiries. If an error appears, contacting the lender for a corrected version is necessary before filing.

Points paid on a mortgage, often listed in Box 6, may also be deductible. These represent prepaid interest paid at closing to reduce the loan’s rate. If used to purchase or build a primary home, points are generally deductible in the year paid. For refinanced or home equity loans, points must typically be deducted over the loan’s life. The IRS requires specific conditions for full deductibility in the first year, including that the points are a percentage of the loan amount and that paying points is common in the area.

Mortgage insurance premiums, reported in Box 5, were previously deductible but are no longer eligible as of 2022. Unless Congress reinstates this provision, taxpayers cannot claim this expense on their 2024 return. This change affects those who put down less than 20% when purchasing a home, as private mortgage insurance (PMI) is often required.

Escrow and Other Boxes

Many homeowners pay property taxes and insurance through an escrow account managed by their lender. While these payments are included in monthly mortgage bills, they are not deductible as mortgage interest. Though Form 1098 may show escrow disbursements in Box 4, this is for informational purposes only. However, property taxes paid from escrow can still be deducted separately on Schedule A, subject to the $10,000 cap for state and local tax (SALT) deductions ($5,000 for married filing separately).

Lenders sometimes issue refunds if an escrow account holds excess funds. If a refund is received, it does not affect tax deductions unless the refunded amount was previously deducted. In that case, a portion may need to be reported as income under the tax benefit rule. For example, if $8,000 in property taxes was deducted in a prior year but $1,000 was refunded due to an overpayment, the IRS may require that $1,000 be included as taxable income in the year of the refund.

Box 10 of Form 1098 reports real estate taxes paid by the lender on behalf of the borrower. While this provides a useful reference, taxpayers should verify the amount with their local tax authority or annual escrow statement. Errors in tax reporting by lenders are not uncommon, and discrepancies can impact deductions. If the reported amount does not match actual payments, retaining bank statements or escrow analysis reports can serve as supporting evidence.

Multiple Lenders or Refinances

Homeowners who refinance or change lenders during the year often receive multiple Form 1098s, each reflecting interest paid to a different lender. Since the IRS expects all mortgage interest to be reported, taxpayers must account for every 1098 received, even if a loan was held for only part of the year. Overlooking a partial-year loan could result in discrepancies that may prompt IRS scrutiny.

When refinancing, any prepaid interest paid at closing should be included in the deduction calculation. Loan origination fees, often labeled as points, may also appear on the new lender’s 1098. Unlike interest, which is fully deductible in the year paid, points on a refinanced loan typically must be amortized over the loan’s life. For example, if a borrower pays $3,000 in points on a 30-year refinance, only $100 per year is deductible unless the loan is paid off early, in which case the remaining balance may be deductible in that year.

Retaining Supporting Documents

Proper record-keeping is essential when claiming mortgage-related deductions, as the IRS may request documentation to verify reported amounts. While Form 1098 provides an official record of interest paid, taxpayers should also retain settlement statements, lender correspondence, and proof of payments in case discrepancies arise. Keeping these documents for at least three years after filing ensures compliance with the IRS’s audit window, though longer retention may be advisable for refinances or home purchases.

For those deducting points over multiple years, maintaining a detailed amortization schedule is necessary. This ensures the correct deduction is claimed annually and provides a clear record if the loan is paid off early. Additionally, if mortgage interest is subject to proration due to loan limits, taxpayers should keep calculations and supporting documentation to substantiate the deduction. Digital copies of records can help prevent loss or damage while ensuring accessibility if needed for future reference.