What is a 1098 form? Form 1098 instructions and Reporting Pointers

Form 1098 instructions and Reporting Pointers

The IRS Tax Form 1098 reports mortgage interest of $600 or more that has been received during a business or trade. A mortgage is defined as an obligation that the real property has been secured by the Internal Revenue Service. A mortgage generally includes land and everything built on it, attached to it, or growing. Mortgage interest doesn’t include mobile homes, boats with living space, etc.

What is a 1098 Form?

This 1098 Form for reporting Mortgage Interest Statement is an IRS Form used by taxpayers to report the amount of interest and the related expenses paid on a mortgage during the tax year when the tax amount exceeds $600 or more.

Who should file Form 1098?

Form 1098 applies to each mortgage, and multiple mortgages require separate filings if they reach the $600 threshold. Tax Form 1098 should not be used for mortgage interest that is received from partnerships, trusts, corporations, associations, and other entities that are not sole proprietors.

Lenders use this tax Form to report that interest payments that exceed $600 in a tax year. The IRS collects this information to ensure appropriate financial reporting for lenders and other entities that receive interest payments. Homeowners use this tax Form to determine the total interest they paid during the tax year while figuring the mortgage interest deduction for their annual tax returns.

Instructions to deduct mortgage interest

The property for which the mortgage interest payments are claimed is expected to meet the IRS standards. This property should include a home or space with basic living amenities such as a sleeping area, area for cooking, bathroom facilities, etc. Mobile homes, house trailers, cooperatives, etc., do not qualify as homes. Also, before reporting the mortgage on Form 1098, it is important to qualify for it. According to the IRS, qualified mortgages include first and second mortgages, refinanced mortgages, and equity loans.

Claiming a deduction for the mortgage interest can be paid is capable of reducing the total taxable income. For deducting mortgage interest from the income, the taxpayer should be the primary borrower and make loan payments. Taxpayers are also limited to deduct interest on the total mortgage debt of $750,000 or less if the origin of the debt is on or after December 16th, 2017. This limit was $1 million for older mortgages.

The due date to mail Form 1098 to the recipients is January 31st. The 1098 Form due date to e-file with the IRS by March 31st of each year.

Taxpayers are not required to include Form 1098 with their tax returns, as this information is already included in the Form provided by the IRS. The taxpayer can use the information of Form 1098 if they are planning to deduct their mortgage payments. Tax Payers would need Form 1098 to deduct the mortgage interest they paid for their home loan for the current tax year. If the taxpayer has more than one qualified mortgage, they will receive separate Tax Form 1098 for each mortgage. IRS Approved Expert tax filing service providers like Tax2efile can help taxpayers with expert services in reporting their tax payments.

Source: IRS