Guide To Form 1098 Mortgage Interest Statement
For homeowners and mortgage lenders alike, Form 1098, Mortgage Interest Statement is an important document for filing taxes each year. While mortgage lenders use this form to report earnings to the Internal Revenue Service (IRS), homeowners use it to review the dollar amount of mortgage interest they’ve paid on their loan.
Here, we’ll explore the details of a mortgage interest statement, how it benefits homeowners and how it can shed light on tax-deductible opportunities.
What Is A 1098 Mortgage Interest Statement?
The IRS Form 1098, Mortgage Interest Statement is used to report mortgage interest earnings over $600 and payments in a given year. Every year, Rocket Mortgage® is required to report Form 1098 to the IRS for your mortgage and provide this statement to you. This statement helps homeowners take advantage of home tax deductions when filing their own IRS-required tax forms.
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Who Uses Form 1098 Mortgage Interest Statement?
Mortgage lenders use the 1098 mortgage interest statement to report how much they received in interest payments from borrowers over the past year. Mortgage loan borrowers use IRS Form 1098 to see how much mortgage interest they paid in the previous year. This information is helpful when determining how much mortgage interest to deduct for their federal tax returns.
How Do You Get Your 1098 Mortgage Interest Statement?
Mortgage lenders typically make the Form 1098, Mortgage Interest Statement available on their website for borrowers during tax season. If your mortgage loan provider doesn’t notify you of your current tax year’s mortgage interest statement by January 31, it’s a good idea to contact them or check their website.
Rocket Mortgage clients should get their paperless 1098 statements on the first business day of each year through their Rocket Mortgage Servicing Account. This is the quickest and most convenient way of getting your statement for your tax return. We understand some of our clients still prefer a hard copy. If you’re getting paper 1098 statements, they’ll be sent by the end of January.
Deducting Mortgage Interest
Many homeowners may be able to deduct mortgage interest for their qualified homes. Your total mortgage amount limits your mortgage interest deduction, and if you’re unsure how this information affects your tax filing, you should consult a tax professional.
A primary or vacation home will generally fall under the definition of a qualified home.
If you had your servicing transferred, refinanced your mortgage during the year or bought a new home and sold an existing one, be sure to get mortgage interest statements. Obtaining interest statements for all applicable mortgages helps you accurately report the amount of interest paid and ensures you’re maximizing your deduction.
Deducting Prepaid Mortgage Interest And Claiming Mortgage Points
As part of the mortgage interest deduction, homeowners may be able to deduct prepaid interest and/or discount points associated with their mortgage transaction for a given year. Additionally, lending companies must report this information in certain cases on Form 1098.
To make sure you have the most accurate information regarding the number of points paid on your mortgage, it’s essential you keep your closing documents and refer to them when filing your taxes.
It’s important to note there are strict regulations concerning the tax year in which you claim the prepaid interest and/or points. We advise talking to a tax preparation professional if you have questions.
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Are Property Taxes Included On Form 1098?
Another potential deduction is your property taxes, also known as local real estate taxes. This information should be found on your 1098 in the section marked as informational only. You can also contact your local tax authority.
If you sold your home in the previous year, the federal government considers you to be the person who paid the property taxes up until the day you sell the property. You may be able to deduct the taxes you paid while living on that property. The IRS provides instructions on how to calculate this, but if you’re not comfortable doing it yourself, we strongly advise speaking with a tax professional.
Form 1098 Mortgage Interest Statement FAQs
Now that we’ve gone over the basics regarding your mortgage interest statement, let’s discuss some frequently asked questions about this form.
Why did I receive a corrected 1098 statement?
If your mortgage lender determines any information on your 1098 is inaccurate due to an error or updated guidance from the IRS, you’ll be issued a corrected statement. However, if the mistake is only on Page 2 (the bottom half of your 1098), a correction won’t be sent. Page 2 is a consumer copy and is not reported to the IRS.
For more information on what this means for your taxes, we recommend consulting the IRS or a tax professional.
Can I claim the mortgage interest deduction even though I’m not listed on the mortgage?
If you pay the mortgage interest, you may be able to take the deduction as long as another person, on the mortgage or otherwise, isn’t claiming the same deduction. If you have any questions about what’s best for your situation, we recommend speaking with a tax advisor.
Why is my mortgage interest statement showing a smaller amount than what I actually paid?
Each tax year, you can deduct mortgage interest for only 13 months’ worth of payments, including January of the following year. This is because mortgage interest is paid sometime after the actual interest charge. January is included because the interest was accrued in December of the previous year.
What’s the number included in box 5 of my Form 1098 Statement if I have a VA loan and don’t pay mortgage insurance?
In the eyes of the IRS, the U.S. Department of Veterans Affairs (VA) funding fee serves as a mortgage insurance payment. Box 5 will include the charges for either:
- Your full VA funding fee amount (if you paid upfront)
- The amount you paid in the past year (if you built it into your balance)
Where are mortgage insurance premiums located in Form 1098?
Mortgage insurance premiums are included in box 5 of your 1098. In addition to mortgage insurance, this would also include the VA funding fee and U.S. Department of Agriculture (USDA) guarantee fees. Although these premiums have been treated as deductible interest in the past, you can't deduct mortgage insurance premiums as of the 2022 tax year.
The Bottom Line
Each year during tax season, it’s a good idea for homeowners to keep an eye out for their Form 1098 Mortgage Interest Statement. This statement can help homeowners make the most out of their tax deductions and get the highest tax return possible.
For our Rocket Mortgage clients who want to learn more, we offer 24/7 access to year-end information and answers to some of the most frequently asked questions. Just log into your Rocket Mortgage Account. You can also reach us at (833) 326-6018.
Or, if you’re seeking tax assistance, please reach out to your tax professional or the IRS.
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Kevin Graham
Kevin Graham is a Senior Blog Writer for Rocket Companies. He specializes in economics, mortgage qualification and personal finance topics. As someone with cerebral palsy spastic quadriplegia that requires the use of a wheelchair, he also takes on articles around modifying your home for physical challenges and smart home tech. Kevin has a BA in Journalism from Oakland University. Prior to joining Rocket Mortgage, he freelanced for various newspapers in the Metro Detroit area.
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