Did you know your 1098 form could be the key to unlocking thousands in mortgage-related tax deductions? If you're looking for smarter tax preparation tips or wondering how to file taxes efficiently, understanding your 1098 form is a must.
Many homeowners miss out on valuable deductions simply because they don’t know how to read this document. Here’s a reason to care: According to J.P. Morgan Private Bank, the TCJA's $10,000 SALT deduction cap still applies through 2025, affecting many in high-tax states.
In this article, you’ll learn how to read your 1098 form, what each box means, how to claim deductions, and how to report it if you own rental property.
What Is IRS Form 1098 and Why Does It Matter for Your Taxes?
What does Form 1098 report?
IRS Form 1098, also known as the Mortgage Interest Statement, is a key tax form that reports the amount of interest you paid on a mortgage loan during the tax year. If the interest paid totals $600 or more, your lender is required to file a Form 1098 with the IRS and send a copy to you, the taxpayer.
This form helps you deduct mortgage interest and other related expenses on your tax return. It typically includes:
- Box 1: Mortgage interest paid (not including mortgage points)
- Box 5: Mortgage insurance premiums (which may be deductible depending on your income and tax laws)
- Box 6: Points paid (especially if you bought the home during the year)
Your lender must issue the Form 1098 Mortgage Interest Statement by January 31. You can use this form to claim one of the most valuable tax deductions available—your mortgage interest deduction.
Who receives Form 1098?
You’ll receive a Form 1098 if you're the borrower on a qualifying mortgage and paid at least $600 in interest. This applies to:
- Homeowners with a traditional mortgage, line of credit, or home equity loan
- Rental property owners if the mortgage interest paid exceeds $600
- Anyone who paid mortgage interest on a second home, vacation property, or investment property
You might not receive a Form 1098 if your interest is less than $600 or if your mortgage is seller-financed and the seller isn’t a sole proprietor or in the business of lending. In that case, you can still report the amount manually using Schedule A of Form 1040, as long as you have documentation.
Further Reading: Maximize your mortgage interest deduction
How Do You Use Form 1098 to Deduct Mortgage Interest on Your Taxes?
Where do you report mortgage interest on your tax return?
You use Form 1098 to report your deductible mortgage interest and claim a deduction on your tax return. Here’s where to enter the information:
- For personal-use homes: Report on Line 8a of Schedule A, attached to your Form 1040.
- For rentals: Report on Schedule E to reduce rental income and claim it as an expense of renting.
If the property is mixed-use (personal and rental), you’ll need to split expenses like mortgage interest and real estate taxes between personal and rental use.
What parts of Form 1098 are tax deductible?
The deduction depends on the details shown on the Form 1098:
- Box 1: Your mortgage interest paid – this is typically fully deductible if the loan amount qualifies under current IRS rules (up to $750,000 for loans after Dec. 15, 2017)
- Box 5: Mortgage insurance premiums – these may be deductible but are subject to income limits and whether Congress renews this tax benefit
- Box 6: Mortgage points – If you paid points to lower your rate when you bought the home, you may be able to deduct them in full or spread out over the life of the loan (original issue discount rules apply)
Use these figures to calculate how much of your mortgage interest qualifies and report it properly to avoid errors that could trigger an IRS audit.
Can You Deduct Mortgage Interest If You Own a Rental or Vacation Property?
How to report mortgage interest for a rental property?
If the property is used solely for rental, you’ll report mortgage interest payments on Schedule E. It becomes part of your related expenses to reduce your rental income.
- Use Form 1098 to pull the amount of interest
- Include it as a deduction directly tied to the cost of doing business as a rental property owner
If you deduct mortgage interest on a rental and the IRS questions it, make sure you can show the property generated income and wasn’t used personally.
What if you use the property for both rental and personal use?
If you rent out the property more than 14 days in the year and also use it yourself, things get more technical. The IRS expects you to deduct the personal part and business part separately:
- Deduct the mortgage interest tied to personal use on Schedule A
- Deduct the rest as a rental expense on Schedule E
- Use a ratio based on days personally used vs. total use (example: 100 days personal use out of 365 = 27.4% personal)
This is critical because failing to divide mortgage interest and real estate taxes properly could get flagged in an IRS tax review or audit.
Further Reading: Learn the difference between loan principal and interest in mortgages
What Are the Common Mistakes to Avoid When Using Form 1098?
What happens if you don’t receive a Form 1098?
No 1098? No problem—as long as you:
- Track the interest paid using statements or payment records
- Know your lender's name, address, and TIN (you’ll need this for Line 8b of Schedule A on your Form 1040)
- Confirm the mortgage is on a qualified residence or rental, and the interest is deductible
This happens often with private loans or seller-financed deals. You’re still allowed to deduct the mortgage interest—you just have to do more legwork and keep clear records in case of an audit.
Can you deduct mortgage interest if you’re not the primary borrower?
Only if two things are true:
- You’re legally liable for the debt (you co-signed or you’re on the loan)
- You actually paid the mortgage interest yourself
If you’re just helping a family member with their payments, but your name isn’t on the loan or property title, you’re not the taxpayer who gets to claim the deduction. The IRS sees this as a gift, not a tax break.
This is a common mistake—and one that can easily delay your refund if your return gets flagged.
Key Takeaways
- Form 1098 reports mortgage interest of $600 or more for tax deduction purposes.
- You can deduct mortgage interest on personal and rental properties using Form 1040 Schedule A or Schedule E.
- Even without receiving a Form 1098, you may still deduct the interest if you have proper records.
- Split mortgage interest deductions if the property is used for both personal and rental use.
- Only the legal borrower who paid the interest can claim the mortgage interest deduction.
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