What is Form 1098? Mortgage Interest Statement Explained

IRS Form 1098, titled "Mortgage Interest Statement," is an information return that reports mortgage interest received from a borrower. Lenders file this form with the IRS and provide a copy to borrowers who can use it to claim the mortgage interest deduction.

The form reports:

• Mortgage interest received from the borrower
• Points paid on the purchase of a principal residence
• Refunds of overpaid interest
• Mortgage insurance premiums
• Outstanding mortgage principal balance
• Mortgage origination date
• Property address securing the mortgage

The following entities must file Form 1098:

• Banks and credit unions that hold mortgages
• Mortgage companies and loan servicers
• Government agencies that receive mortgage payments
• Any trade or business that receives at least $600 in mortgage interest from an individual

$600 Threshold: You must file Form 1098 if you received $600 or more in mortgage interest from a borrower during the calendar year. Interest received from a corporation, partnership, trust, estate, association, or company (other than a sole proprietor) does not need to be reported.

Form 1098 contains the following boxes:

• Box 1 - Mortgage interest received: Total interest received from the borrower during the year
• Box 2 - Outstanding mortgage principal: Principal balance as of January 1 of the year
• Box 3 - Mortgage origination date: Date the mortgage was originated
• Box 4 - Refund of overpaid interest: Interest refunded to the borrower
• Box 5 - Mortgage insurance premiums: Premiums paid for qualified mortgage insurance
• Box 6 - Points paid on purchase: Points paid by the borrower on the purchase of a principal residence
• Box 7 - Property address: Address of the property securing the mortgage
• Box 8 - Number of properties: Number of mortgaged properties reported on this form
• Box 9 - Acquisition date: Date the borrower acquired the property
• Box 10 - Other information: Other relevant information

Homeowners can deduct mortgage interest paid on qualified home loans. The deduction is claimed on Schedule A (Form 1040) for taxpayers who itemize deductions.

Current Limits (Tax Cuts and Jobs Act):

• Mortgages after December 15, 2017: Interest is deductible on up to $750,000 of qualified residence loans ($375,000 if married filing separately)
• Mortgages before December 16, 2017: Interest is deductible on up to $1,000,000 of acquisition debt plus $100,000 of home equity debt
• Qualified residence: Your main home or second home (not rental property)

The mortgage must be secured by a qualified residence for the interest to be deductible. Rental property mortgages are handled differently, with interest deducted on Schedule E.

Points (also called loan origination fees or discount points) are amounts paid to a lender to reduce the mortgage interest rate. Each point equals 1% of the loan amount.

Box 6 reports points paid on the purchase of a principal residence. These points may be fully deductible in the year paid if:

• The loan is secured by your main home
• Paying points is an established practice in your area
• The points charged do not exceed the amount generally charged
• You use the cash method of accounting
• The funds you provided at closing (down payment, etc.) were at least as much as the points charged

Points paid on a refinance must generally be deducted over the life of the loan, not in the year paid. Seller-paid points are deductible by the buyer, but reduce the basis of the home.

Lenders must meet the following deadlines for Form 1098:

When a deadline falls on a weekend or federal holiday, the due date moves to the next business day. For specific dates, see our Form 1098 Filing Deadlines.

Box 5 reports mortgage insurance premiums paid by the borrower. Qualified mortgage insurance premiums may be deductible as mortgage interest, subject to income limitations.

Types of mortgage insurance reported:

• Private mortgage insurance (PMI) from private insurers
• FHA mortgage insurance premiums
• VA funding fees
• USDA guarantee fees

Note: The deduction for mortgage insurance premiums has historically been subject to annual extensions by Congress. Check current tax law for the deduction's availability.

What if I have multiple mortgages?

You should receive a separate Form 1098 for each mortgage. Add the amounts from all 1098 forms to determine your total deductible mortgage interest, subject to the applicable limits.

What if I refinanced during the year?

You will receive Form 1098 from both the old and new lenders showing interest paid on each loan. Points paid on the refinance must be amortized over the life of the new loan.

What if I sold my home?

You should receive Form 1098 showing interest paid up to the date of sale. If the buyer assumed your loan, make sure the lender records the change properly.

What if the form is incorrect?

Contact your lender immediately to request a corrected Form 1098. Do not report amounts different from what your lender reported to the IRS without documentation.

The IRS imposes penalties for late, incorrect, or missing Form 1098 filings:

• Filed within 30 days of due date: $60 per form
• Filed after 30 days but by August 1: $130 per form
• Filed after August 1 or not filed: $330 per form
• Intentional disregard: $660 per form with no maximum

Small businesses (gross receipts of $5 million or less) have lower maximum penalties. If you need additional time, request an extension using Form 8809.