What Form 1098 tells you about your mortgage payments

Form 1098 is a record your mortgage lender sends you each January showing how much mortgage interest you paid during the previous year. The form breaks down the interest separately from principal, because only the interest portion may reduce your federal taxable income — if you itemize deductions on your tax return instead of taking the standard deduction.

You receive Form 1098 if you paid $600 or more in mortgage interest during the year. Your lender is required to send it to you and to the IRS. The form also reports property taxes paid through an escrow account if your lender collects them with your mortgage payment.

The amount on Form 1098 is not automatically deductible. Whether you can use it depends on your filing status, your total deductions, and whether you choose to itemize or take the standard deduction.

Key Takeaways

  • Form 1098 shows mortgage interest paid in the prior year, but you can only deduct it if you itemize deductions and the total exceeds the standard deduction for your filing status.
  • The form reports interest only, not principal, because principal payments do not reduce your taxable income.
  • You receive Form 1098 only if you paid $600 or more in mortgage interest; some borrowers with smaller loans or recent purchases may not receive one.
  • Property taxes reported on Form 1098 count toward the $10,000 annual cap on state and local tax deductions, which also includes sales tax or income tax.
  • If the amount on Form 1098 does not match your records, contact your lender to request a corrected form before filing your tax return.

When you can deduct mortgage interest from Form 1098

You can deduct mortgage interest only if two conditions are both true: you itemize deductions on your tax return, and the mortgage is secured by your home (a primary residence, second home, or property held for rental income). Interest on a home equity line of credit or second mortgage also appears on Form 1098 and follows the same rules.

Itemizing means listing your deductions individually instead of taking the standard deduction. The standard deduction for 2024 is $14,600 for single filers and $29,200 for married filing jointly. If your mortgage interest plus other deductions (charitable gifts, state and local taxes, medical expenses) add up to more than the standard deduction, itemizing saves you money. If not, the standard deduction is the better choice, and the Form 1098 amount does not reduce your taxes.

The mortgage must also meet specific requirements: it cannot exceed $750,000 in principal (or $1 million if the loan originated before December 16, 1987), and the property must be your home or a home you own. Interest on investment properties, business loans, or personal loans does not may have access to.

How property taxes on Form 1098 affect your deductions

Form 1098 may report property taxes your lender paid from your escrow account. These taxes count toward the State and Local Tax (SALT) deduction, which has a $10,000 annual cap. The cap combines property taxes, state income tax (or sales tax), and local income tax into one limit.

If your property taxes alone exceed $10,000, you can deduct only $10,000 total for all state and local taxes combined. If you pay $8,000 in property taxes and $3,000 in state income tax, you can deduct $10,000 total, not $11,000. This cap applies whether you live in a high-tax state or a low-tax state.

Property taxes you pay directly to your county or municipality do not appear on Form 1098 — only those collected through your mortgage escrow account are reported there. If you pay property taxes outside escrow, you track those separately on your tax return.

Discrepancies between Form 1098 and your mortgage statements

The interest amount on Form 1098 should match the total interest you paid during the calendar year. However, the number sometimes differs from what you see on your monthly mortgage statements because of how payments are timed and recorded.

If you made a large principal payment or refinanced mid-year, the interest calculation changes. If you paid off the loan early, the final payment may include less interest than a normal month. If you made extra payments or paid biweekly instead of monthly, the timing affects which year the interest is counted in.

Contact your lender if the Form 1098 amount is significantly different from what you expected. Ask them to explain the difference or request a corrected form (Form 1098-C) if an error occurred. You have until the tax filing important date to request a correction.

Form 1098 for refinanced or paid-off mortgages

If you refinanced your mortgage during the year, you receive a Form 1098 from each lender — the original lender for the months before refinancing, and the new lender for the months after. The interest amounts are split between the two forms based on when each loan was active.

If you paid off your mortgage completely, you still receive a Form 1098 for that year showing the interest paid before payoff. The form covers only the months the loan was active. If you paid it off in June, the form shows interest through June only.

When you refinance, the old loan ends and a new one begins. Any remaining balance on the old loan is paid off with the new loan proceeds. The interest you paid on the old loan is deductible in the year you paid it, regardless of when the refinance closed.

What to do if you do not receive Form 1098

You are required to receive Form 1098 only if you paid $600 or more in mortgage interest during the year. If your mortgage balance is small, your loan is very new, or you made a large principal payment early in the year, you may not meet that threshold.

If you paid less than $600 in interest, you can still deduct that interest if you itemize — you just do not receive the form. Contact your lender and ask for a statement showing the interest paid. You can use that statement to report the deduction on your tax return.

If you paid $600 or more and did not receive Form 1098 by early February, contact your lender. They may have an incorrect mailing address or may not have processed the form yet. Request that they send it or provide a copy.

Form 1098 and rental property mortgages

If you own rental property and have a mortgage on it, the lender sends you Form 1098 showing the interest paid. Rental property interest is treated differently from primary residence interest: you deduct it as a business expense on Schedule E (Supplemental Income and Loss), not as an itemized deduction.

This means rental property mortgage interest reduces your rental income regardless of whether you itemize. You do not have to choose between itemizing and taking the standard deduction — the rental interest is deducted either way, on a separate form.

Property taxes on rental property also follow different rules. They are deducted as a rental expense on Schedule E, not subject to the $10,000 SALT cap that applies to personal residences.

Frequently Asked Questions

Do I have to use the amount on Form 1098 to deduct mortgage interest?

No. The amount on Form 1098 is what the lender reports to the IRS, but you can deduct only the interest you actually paid. If you made extra payments or paid off the loan early, you deduct what you paid, not what the form shows. Keep your own records of payments to verify the amount.

Can I deduct mortgage interest if I take the standard deduction?

No. Mortgage interest is an itemized deduction only. If your total itemized deductions do not exceed the standard deduction for your filing status, you cannot deduct the mortgage interest. You must choose one or the other, not both.

What if my lender did not report all the interest I paid?

Contact your lender when ready and ask for a corrected Form 1098. Lenders must report interest paid during the calendar year. If the form is wrong, request Form 1098-C (the corrected version). You have until the tax filing important date to request the correction and file an amended return if needed.

Does Form 1098 include interest on a home equity line of credit?

Yes, if the line of credit is secured by your home and the funds were used to buy, build, or improve that home. Interest on a home equity line used for other purposes (debt consolidation, personal expenses) is not deductible. Your lender should specify on Form 1098 which interest qualifies.

How do I report Form 1098 on my tax return?

If you itemize, you report the mortgage interest on Schedule A (Itemized Deductions), line 8. If the mortgage is on a rental property, you report it on Schedule E instead. The IRS matches Form 1098 data to your return, so make sure the amounts align with what your lender reported.