Use the 1098 form to report mortgage interest

 

If you already have your Form 1098, Mortgage Interest Statement, you probably have everything you need to claim a mortgage interest deduction  on your tax return.

But, if you’re deducting for your home or a rental property, your mortgage interest tax process might look a little different.

Read on to see what you need to report mortgage interest reported on your mortgage interest tax form, the 1098.

What is a 1098 tax form used for?

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

What does the 1098 show?

Form 1098On your 1098 tax form is the following information:

  • Box 1 – Interest paid, not including points
  • Box 2 – Outstanding mortgage principle
  • Box 3 – Mortgage origination date
  • Box 4 – Refund of overpaid interest
  • 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.

Deducting mortgage interest using Form 1098

You might be able to deduct the Form 1098 amounts if they meet the guidelines for that amount.

Put Box 1, deductible mortgage interest, and Box 6, points, into your Schedule A (Form 1040), Line 8a. Mortgage insurance premiums from Box 5 can be deducted on Line 8d of Schedule A (income limits apply) only if the insurance applies to premiums made on contracts issued between 2006 and 2022 and apply to a new or refinanced mortgage (to the extent the refinanced mortgage replaces the outstanding acquisition debt.

Please note, for mortgage interest to be deductible, the following requirements must be met:

  • The taxpayer must own the home and be legally liable for the debt (or considered an equitable owner)
  • The debt must be secured by the home and used to purchase, construct, or substantially improve a qualified residence and can include a main or second home, line of credit, or home equity loan.
  • 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: Use Schedule E (1098)

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, generally points are prepaid interest so you can’t deduct the full amount in the year you paid them. You must deduct the points over the life of the loan. The amount you can deduct each year is subject to the original issue discount rules and is generally the difference between:

  • The amount you borrowed (redemption price at maturity or on principal) and
  • The proceeds (issue price).

Pro tip: This process can be complex, so you can get help from an H&R Block tax pro. We can help you determine how much can be deducted.

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

You must split property expenses if both 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: 1098 schedules to use

As described above, if you didn’t rent out your vacation home, you may be able to deduct the mortgage interest on it according to the same rules as deducting interest for a first or second home.

Use Schedule A to deduct the home mortgage interest. If you used the vacation home personally and rented it out for no more than 14 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 more than 14 days with personal use:

If a residence is used personally for the greater of more than 14 days or 10% of the rental days, then:

  • You must report the rental income
  • You can deduct expenses related to renting the property. However, deductions are allocated based on the days personally used and are limited to gross rental income. 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 of the number of days rented and either the number of days:

  • You owned the home in the year
  • You used the home for personal purposes

Get help with 1098 mortgage interest reporting

Navigating form 1098 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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