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Decoding Form 1098: Your Guide to Finding Property Taxes

Property taxes can be a significant deduction when filing your income taxes, and the Form 1098 is often your key to unlocking that tax benefit. So, where do you find those crucial numbers? On Form 1098, specifically the “Mortgage Interest Statement,” your property taxes are located in Box 10. This box is clearly labeled “Real estate taxes paid.” Let’s delve deeper into understanding Form 1098 and how to accurately report your property taxes.

Understanding Form 1098: Your Mortgage Interest Statement

Form 1098, formally known as the Mortgage Interest Statement, is an IRS tax form that reports the amount of mortgage interest you paid during the tax year. It’s issued by your mortgage lender if you paid $600 or more in mortgage interest. While primarily focused on interest, it also conveniently includes the amount of property taxes paid through your escrow account.

What Information is Included on Form 1098?

Beyond property taxes, Form 1098 contains vital information for your tax return:

Box 1: Mortgage Interest Received from Payer(s): This is the total amount of mortgage interest you paid during the year.
Box 2: Outstanding Mortgage Principal: Shows the principal amount outstanding on your mortgage at the beginning of the year.
Box 3: Mortgage Origination Date: Indicates when your mortgage was originated. This is crucial for understanding certain mortgage interest deduction limitations.
Box 4: Reserved
Box 5: Reserved
Box 6: Points Paid on Purchase of Principal Residence: If you paid points (loan origination fees) when you bought your home, they’re reported here.
Box 7: Reserved
Box 8: Checkbox for Mortgage Insurance Premiums: If checked, it means you paid mortgage insurance premiums, which may be deductible.
Box 9: Mortgage Insurance Premiums: The total amount of mortgage insurance premiums paid during the year.
Box 10: Real Estate Taxes Paid: This is where your property taxes are located.
Box 11: Policy Number: If the mortgage relates to a policy of insurance, the policy number.

Decoding Box 10: Real Estate Taxes Paid

Box 10 of Form 1098 is the treasure chest you’re looking for. It displays the total amount of property taxes your mortgage servicer paid on your behalf from your escrow account during the tax year. This amount is deductible on Schedule A (Form 1040), Itemized Deductions, subject to certain limitations.

Why is the Tax Amount in Box 10 So Important?

This box is crucial for accurately claiming your property tax deduction. Relying solely on bank statements or personal records can be inaccurate. Form 1098 provides an official, verified figure from your mortgage lender.

What If Box 10 is Empty?

If Box 10 is empty on your Form 1098, it means your mortgage servicer did not pay your property taxes from an escrow account. This could be because you pay your property taxes directly to the taxing authority yourself. If you pay your property taxes directly, you’ll need to rely on your property tax bills and payment records to determine the deductible amount.

FAQs: Mastering Form 1098 and Property Taxes

Here are some frequently asked questions about Form 1098 and claiming your property tax deduction, explained in detail:

What if the property tax amount in Box 10 seems incorrect?
First, double-check your own records. Compare the amount in Box 10 to your property tax statements and escrow account statements. If you still believe there’s an error, contact your mortgage lender immediately. They can investigate and issue a corrected Form 1098 (Form 1098-C) if necessary. Don’t file your taxes until you receive the corrected form.
Can I deduct more property taxes than what’s listed in Box 10?
Potentially, yes. Box 10 only reflects property taxes paid through your mortgage escrow account. If you made any direct payments to the taxing authority (e.g., if your escrow account didn’t cover the full amount, or you paid a supplemental bill), you can include those payments in your property tax deduction, but only if they are actually paid. Remember to keep detailed records of these payments.
What is the SALT deduction limit, and how does it affect my property tax deduction?
The SALT (State and Local Tax) deduction is capped at $10,000 per household (or $5,000 if married filing separately). This limit applies to the total of your state and local taxes, including property taxes, state income taxes (or sales taxes, if you choose to deduct those instead), and any other deductible state and local taxes. If your combined state and local taxes exceed $10,000, you can only deduct up to that limit. This is a significant factor for homeowners in high-tax states.
What happens if I have multiple properties?
You’ll receive a separate Form 1098 for each mortgage on each property. You’ll need to track the property taxes paid for each property separately and combine them when calculating your total property tax deduction, keeping in mind the SALT limit.
I refinanced my mortgage during the year. Will I receive one or two Forms 1098?
You will likely receive two Forms 1098. The first one will be from your original lender, covering the period before the refinance. The second will be from your new lender, covering the period after the refinance. Each form will report the property taxes paid during its respective period.
What if I sold my home during the year?
You’ll receive a Form 1098 from your lender covering the period you owned the home. The property taxes listed will only reflect the portion of the year you owned the property and paid taxes through the escrow account. Your settlement statement (closing disclosure) from the sale might also show a proration of property taxes between you and the buyer, which needs to be considered when calculating your deduction.
Do I need to attach Form 1098 to my tax return?
No, you do not need to attach Form 1098 to your tax return. However, you must keep it with your tax records, as it serves as documentation to support your deductions. The IRS may request it if they audit your return.
What if I didn’t receive Form 1098?

If you paid $600 or more in mortgage interest, you should receive Form 1098 by January 31st of the following year. If you haven’t received it, contact your mortgage lender. They may have an incorrect address or may need to reissue the form. You can also access a copy through your lender’s online portal in most cases. Even if you don’t receive the form, you are still responsible for reporting your mortgage interest and property taxes accurately.
Are property taxes deductible for a rental property?
Yes, property taxes on a rental property are deductible, but not on Schedule A. Instead, they’re deducted on Schedule E (Form 1040), Supplemental Income and Loss, as an expense related to your rental activity. This deduction reduces your rental income.
Can I deduct property taxes on a second home?
Yes, you can generally deduct property taxes on a second home, subject to the SALT limit. The same rules apply as with your primary residence. You’ll need to itemize deductions on Schedule A to claim the deduction.
What if my property taxes include assessments for local improvements?
Assessments for local improvements, such as sidewalks or sewer lines, are generally not deductible. However, if the assessment is for maintenance or repair of existing facilities, it may be deductible. You should carefully review your property tax bill to determine what portion, if any, of the assessments is deductible.
How does the standard deduction affect whether I can deduct my property taxes?
To deduct property taxes, you must itemize deductions on Schedule A. This means that your total itemized deductions (including property taxes, mortgage interest, charitable contributions, and other eligible expenses) must exceed the standard deduction for your filing status. If your itemized deductions are less than the standard deduction, it’s generally more beneficial to take the standard deduction, in which case you won’t receive any tax benefit from your property taxes.

Understanding Form 1098 and its intricacies is essential for accurately claiming your property tax deduction. By knowing where to find the necessary information and understanding the relevant rules and limitations, you can confidently file your taxes and potentially save money.