IRS Form 1098: Mortgage Interest Tax Deduction Guide

Important: Form 1098 reports deductible home loan expenses that could save you thousands in taxes when itemizing deductions.

Decoding Your Form 1098

This lender-provided statement details your potential mortgage-related tax deductions.

Key Components Explained:

  • Box 1: Mortgage interest paid ($600+ triggers form)
  • Box 2: Outstanding mortgage principal
  • Box 3: Mortgage origination date
  • Box 4: Refund of overpaid interest
  • Box 5: Mortgage insurance premiums (PMI/MIP)
  • Box 6: Points paid on purchase loans
  • Box 7: Property address securing mortgage
Who Should Receive This Form?

You'll receive Form 1098 if you:

  • Paid $600+ in mortgage interest to a single lender
  • Have a secured debt on qualified home (primary or secondary residence)
  • Paid deductible points or mortgage insurance premiums

Note: Even if you don't receive a 1098, you may still deduct qualifying interest.

Current Deduction Rules (2024)

Mortgage Interest

  • Deductible on loans up to $750,000 ($375k if MFS)
  • Lower $1M limit for pre-12/15/2017 loans
  • Includes primary + 1 secondary residence

Mortgage Points

  • Fully deductible in year paid for purchase loans
  • Amortized over loan life for refinancing points
  • Must meet IRS "points" definition

Mortgage Insurance

  • PMI/MIP may be deductible if AGI ≤ $100k ($50k MFS)
  • Phases out completely at $110k ($55k MFS)
  • Check annual tax extender legislation
How to Claim Mortgage Deductions
  1. Verify accuracy against your year-end loan statement
  2. Gather supporting documents:
    • Closing disclosure (for points)
    • PMI payment records
    • Refinancing paperwork
  3. Complete Schedule A:
    • Line 8a: Mortgage interest (from Box 1)
    • Line 8d: Mortgage insurance premiums (Box 5)
    • Line 8e: Points (Box 6)
  4. Transfer total to Form 1040
Special Situations & Planning Tips
  • Multiple Properties: Can combine interest on primary + 1 vacation home
  • HELOCs: Interest deductible only if used for home improvements
  • Refinancing: Points must be amortized over loan term
  • Rental Properties: Report on Schedule E, not Schedule A
  • Cash-Out Refis: Only interest on original loan balance may be deductible
Common Mistakes to Avoid

Overlooking Smaller Lenders

Some lenders don't issue 1098s - you still must report the interest

Missing Property Tax Reporting

Form 1098 may include property taxes in Box 10 (separate deduction)

Ignoring Phaseout Rules

High-income taxpayers may lose some deductions

Maximize Your Homeownership Tax Benefits

Proper mortgage interest reporting can yield significant tax savings.

Our Mortgage Tax Services Include:

  • Accurate 1098 reconciliation
  • Points amortization calculations
  • HELOC interest analysis
  • Refinancing tax implications
  • Itemization vs. standard deduction planning

Call 972-519-0041 today for a free mortgage tax consultation

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