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Decoding Form 1098: Your Guide to Mortgage Interest Statements

The query isn’t exactly “How do I get Form 1098 mortgage?”, but rather “How do I get Form 1098 pertaining to my mortgage?” You don’t apply for a 1098; you receive it. This form is issued by your mortgage lender if you paid at least $600 in mortgage interest during the tax year. It’s your roadmap for claiming the mortgage interest deduction on your taxes. If you paid that much interest and haven’t received one by the end of January, it’s time to start making some calls!

Understanding Form 1098: Your Tax Deduction Key

Form 1098, officially titled “Mortgage Interest Statement,” is a crucial document for any homeowner who has a mortgage. Think of it as your annual report card from your lender detailing how much interest you shelled out over the past year. The information on this form is critical for claiming the mortgage interest deduction, a significant tax break for many homeowners.

Deciphering the Key Fields

The form itself isn’t complicated, but understanding what each box represents is essential. Here’s a breakdown:

Box 1: Mortgage Interest Received from Payer(s)/Borrower(s): This is the headline figure – the total amount of mortgage interest you paid during the year. This is the figure you’ll primarily use when calculating your deduction.
Box 2: Outstanding Mortgage Principal: This shows the outstanding principal balance on your mortgage as of January 1st of the tax year. While not directly used for calculating the mortgage interest deduction, it helps you track your mortgage progress and can be useful in other financial calculations.
Box 3: Mortgage Origination Date: This indicates when the mortgage was initially taken out. This is important because there are limits to how much mortgage interest you can deduct based on when your loan was originated. Generally, loans originated before December 16, 2017, have higher deduction limits.
Box 4: Refund of Overpaid Interest: If you received a refund of overpaid interest, it will be reported here. This reduces the amount of mortgage interest you can deduct.
Box 5: Property Address: This verifies that the mortgage is indeed for your primary residence (or a qualified second home).
Box 6: Borrower’s Social Security Number: This identifies you to the IRS.
Box 7: Lender’s Name, Address, and Phone Number: This identifies the entity that is reporting the information to the IRS.

Why is Form 1098 Important?

Simply put, Form 1098 unlocks potential tax savings. The mortgage interest deduction allows homeowners to deduct the interest they pay on their mortgage from their taxable income. This can significantly reduce your tax liability, especially in the early years of your mortgage when interest payments are typically higher.

However, there are limitations to the deduction. These include:

Loan Limits: For mortgages taken out after December 15, 2017, you can only deduct interest on the first $750,000 of mortgage debt ($375,000 if married filing separately). For mortgages taken out before that date, the limit is $1 million ($500,000 if married filing separately).
Alternative Minimum Tax (AMT): The mortgage interest deduction is not allowed when computing your AMT liability.
Itemizing Required: You must itemize deductions on Schedule A of Form 1040 to claim the mortgage interest deduction. If your standard deduction exceeds your itemized deductions (including mortgage interest), you won’t benefit from it.

What To Do If You Don’t Receive Form 1098

The most common reason you wouldn’t receive a 1098 is if you paid less than $600 in interest. However, if you know you paid more than $600 and haven’t received the form by the end of January, take these steps:

Contact your lender: This is the first and most important step. Reach out to your mortgage lender directly and inquire about the status of your Form 1098. There may have been a mailing issue, or they may need to update your address.
Check your online account: Many lenders now offer online access to tax documents. Check your online mortgage account for a digital copy of your Form 1098.
Gather your records: Collect your mortgage statements for the year. These statements will show the amount of interest you paid each month. You can use these to calculate your total mortgage interest paid.
File Form 4852: If you can’t obtain Form 1098 from your lender, you can file Form 4852, “Substitute for Form W-2, Wage and Tax Statement.” This form allows you to estimate your mortgage interest paid based on your own records. You’ll need to provide a reasonable explanation of why you’re unable to obtain Form 1098 from your lender. Do not file Form 4852 without first trying to get the form from your lender.
Consider Filing an Extension: If you are facing difficulties in obtaining your 1098, consider filing an extension to your tax return. This will give you more time to resolve the issue and file an accurate return.

Frequently Asked Questions (FAQs) about Form 1098

1. What if my Form 1098 is incorrect?

Contact your lender immediately. They will need to correct the error and issue a corrected Form 1098. Don’t file your taxes until you receive the corrected form. The IRS matches the information on your tax return with the information reported by your lender, so discrepancies can trigger audits.

2. Can I deduct mortgage interest on a second home?

Yes, you can generally deduct mortgage interest on a second home, as long as it meets certain criteria. The second home must be used exclusively as a residence, and you cannot rent it out for more than 14 days during the year (unless you use it more than 10% of the days it is rented).

3. What if I refinanced my mortgage during the year?

You’ll receive a Form 1098 from each lender – the lender you refinanced from and the lender you refinanced with. Each form will report the interest paid to that particular lender during the portion of the year when you had a mortgage with them.

4. I have a HELOC. Do I get a Form 1098 for that?

Yes, if you paid at least $600 in interest on your Home Equity Line of Credit (HELOC), you should receive a Form 1098. However, the deductibility of HELOC interest depends on how the funds were used. The interest is deductible only if the funds were used to buy, build, or substantially improve your home.

5. My spouse and I are separated, but both our names are on the mortgage. Who gets the Form 1098?

The lender will typically issue the Form 1098 under the name and Social Security number of the primary borrower. However, both borrowers can deduct the interest they actually paid. If the form is only under one spouse’s name, the other spouse can still deduct their portion of the interest, but they should keep records to prove they paid it.

6. I paid points when I got my mortgage. Are those deductible?

Yes, mortgage points (also called loan origination fees) are generally deductible in the year you pay them. However, they must meet certain requirements. The points must be for the purchase or improvement of your main home, the payment must be separate from other financing charges, and the points must be calculated as a percentage of the loan amount.

7. What if I inherited a house with a mortgage?

You can only deduct mortgage interest if you are legally liable for the mortgage. If you assumed the mortgage (meaning you took over the original borrower’s responsibility), you can deduct the interest you pay. If you are simply paying the mortgage as an heir but aren’t legally obligated, you generally cannot deduct the interest.

8. How long should I keep my Form 1098?

You should keep your Form 1098 along with your other tax records for at least three years from the date you filed your return or two years from the date you paid the tax, whichever is later. The IRS can audit your return within this timeframe, so it’s important to have documentation to support your deductions.

9. I sold my house during the year. Will I still receive a Form 1098?

Yes, you’ll receive a Form 1098 reporting the mortgage interest you paid from January 1st up to the date you sold the house.

10. Can I access my Form 1098 online?

Many lenders now offer online access to your Form 1098 through their website or mobile app. Check with your lender to see if this option is available. This is often the quickest and easiest way to obtain your form.

11. What is the deadline for lenders to send out Form 1098?

Lenders are required to send out Form 1098 by January 31st of each year. If you haven’t received your form by then, it’s time to contact your lender.

12. Can I deduct property taxes on the same form as mortgage interest?

No, property taxes are not reported on Form 1098. Property taxes are deducted separately on Schedule A of Form 1040, and you’ll need your property tax bill to determine the amount you paid. There’s a limit of $10,000 ($5,000 if married filing separately) for the combined deduction of state and local taxes (SALT), including property taxes.