What is a 1098 Form? How to Report Mortgage Interest

 

If you already have your Form 1098, Mortgage Interest Statement, you probably have everything you need to claim a deduction for your mortgage interest and points. Depending on if you are deducting for your home or a rental property, there might be a variety of different steps you have to take.

Read on to see what you need to report mortgage interest reported on your mortgage interest tax form…

How to Report Mortgage Interest from 1098 Tax Form

If you pay $600 or more in mortgage interest, your lender must send you and the 1098 tax form. If your mortgage interest is less than $600, your lender doesn’t have to send you this form.

On your 1098 tax form is the following information:

tax reform for homeowners

  • Box 1 – Interest you paid, not including points
  • Box 2 – Outstanding mortgage principle
  • Box 3 – Mortgage origination date
  • Box 5 – Mortgage insurance premiums
  • Box 6 – Mortgage points you might be able to deduct. You usually see an amount in this box only if this is the mortgage you took out when you bought the home.

You might be able to deduct the Form 1098 amounts if they meet the guidelines for that kind of amount. Put Box 1, deductible mortgage interest, and Box 6, points, into your Schedule A, Line 8a. Mortgage insurance premiums from Box 5 can be deducted on Line 8d of Schedule A (income limits apply).

Please note, the requirements are as follows: the debt secured by the home and used to purchase, construct, or substantially improve a main or second home. The maximum amount of the loans must be under $750,000 ($375,000 if filing separately).

Enter these amounts on Schedule A:

  • Line 8b – Deductible mortgage interest you paid that wasn’t reported on the Form 1098
  • Line 8c – Points not reported to you on your Form 1098

The recipient of the interest might be an individual, not a business. If so, enter on the dotted lines next to Line 8b the recipient’s:

  • Name
  • Address
  • Identifying number — usually one of these:
    • Social Security number (SSN)
    • Employer Identification Number (EIN), if a business

Rental Property

You can deduct mortgage interest on rental property as an expense of renting the property. You report this mortgage interest from Form 1098 on Schedule E, not Schedule A. Also, you might have paid points when you took out the mortgage on your rental property. If so, you can’t deduct the mortgage points in the year you paid them. You must deduct the points over the life of the loan.

How to report mortgage interest from personal and rental use of the same property

You must split property expenses if both of these apply:

  • Part of your property was used by you, your friends or your family.
  • You rent out another part of your property.

You should split expenses that apply to the entire property based on the percentage of space rented. These split expenses include mortgage interest and real estate taxes.

You can only deduct the rental part of expenses from rental income. If you itemize, you can use Schedule A and IRS Form 1098 to deduct the personal part of:

  • Real estate taxes
  • Mortgage interest

You can’t deduct the personal portion of other expenses, like utilities.

Vacation homes

If you didn’t rent out your vacation home, you may be able to deduct the mortgage interest on it, if the qualifications are met. Qualifications are the same as for a first/second home. The vacation home must be the taxpayers first or second home, must be debt used to purchase, construct or substantially improve the home, secured by the residence, total debt on both homes must not exceed $750,000 ($375,000 for MFS).

Use Schedule A to deduct the home mortgage interest. If you used the vacation home personally and rented it out for fewer than 15 days:

  • You don’t need to report the rental income.
  • You can deduct the mortgage interest you paid according to the usual rules.

If you rented out the home for 15 days or more:

  • You must report the rental income
  • You can deduct expenses related to renting the property. The expenses for personal use, are deductible on Schedule A if they qualify.

Use these schedules to report your mortgage interest on form 1098 from a vacation home used both personally and as a rental:

  • Schedule E – Report the mortgage interest for the time you rented out the property.
  • Schedule A – Report the remainder of the mortgage interest you paid as a deduction.

The division of expenses is based on a ratio between the number of days rented and either of these:

  • Number of days you owned the home in the year
  • Number of days you used the home for personal purposes

Get Help with Taxes on 1098 for Mortgage Interest Reporting

Navigating form 1098 and mortgage interest can be tricky. This is why you may want to look for help.

Whether you make an appointment with one of our knowledgeable tax pros or choose one of our online tax filing products, you can count on H&R Block to help you get back the most money possible.

 

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