What is the Form 1098?

Form 1098, Mortgage Interest Statement, is a tax form used by taxpayers in the United States to report the amount of interest and related expenses paid on a mortgage during the tax year when the amount totals $600 or more. In this article, we'll provide information on the exact steps for filling out Form 1098 and other important information.

Here's a summary of the type of information included in Form 1098:

• Recipient's/lender's name, address, and telephone number
• Payer's/borrower's name and address
• Account number (if applicable)
• Mortgage interest received from payer(s)/borrower(s)
• Outstanding mortgage principal
• Mortgage origination date
• Refund of overpaid interest
• Mortgage insurance premiums
• Points paid on the purchase of principal residence
• Address of property securing mortgage
• Number of mortgaged properties
• Mortgage acquisition date

Who needs to file the Form 1098?

Form 1098 is typically filled out by mortgage lenders, such as banks, credit unions, and other financial institutions, who receive mortgage interest payments from borrowers. The form is required when the total interest paid on a mortgage during the tax year is $600 or more. However, there are certain exceptions to this rule, as outlined below:

• Individuals who receive mortgage interest payments in the course of their trade or business but are not engaged in the business of lending money, such as real estate developers or property managers, are not required to file Form 1098.
• Governmental units or any of their subsidiary agencies are exempt from filing Form 1098.
• Foreign persons who receive mortgage interest payments are not required to file Form 1098, unless they have a U.S. trade or business.
• Cooperative housing corporations are not required to file Form 1098 for interest received from their tenant-stockholders.
• Interest received on seller-financed mortgages for which the borrower is not the payer of record, such as in cases where the mortgage is serviced by a third party, is not reported on Form 1098.

Essential updates to the Form 1098

In recent years, there have been some updates to Form 1098 that taxpayers and mortgage lenders should be aware of:

• Starting from the tax year 2018, the deduction for mortgage insurance premiums was temporarily extended through December 31, 2020, as part of the Taxpayer Certainty and Disaster Tax Relief Act of 2019. This means that mortgage insurance premiums paid during the tax years 2018, 2019, and 2020 can be reported on Form 1098 and may be deductible for eligible taxpayers. However, this provision has not been extended for tax years 2021 and beyond, so mortgage insurance premiums paid in 2021 are not deductible and should not be reported on Form 1098.
• As of the tax year 2018, the Tax Cuts and Jobs Act (TCJA) has limited the mortgage interest deduction for taxpayers who itemize deductions on Schedule A (Form 1040). The deduction is now limited to interest on up to $750,000 of qualified residence loans, or $375,000 for married taxpayers filing separately. This change affects loans taken out after December 15, 2017. For loans taken out before this date, the previous limit of $1 million, or $500,000 for married taxpayers filing separately, still applies. This change is reflected in the instructions for Form 1098 and should be considered when reporting mortgage interest on the form.

It's important for both mortgage lenders and borrowers to stay informed about any changes to Form 1098 and related tax laws, as these updates can impact the reporting and deductibility of mortgage interest and other expenses.

2024 Form 1098 filing deadlines

Lenders are required to file Form 1098 annually, typically by the end of February, or by the end of March if filing electronically. They must also send a copy of the form to borrowers by the end of January of the filing year. If any due date falls on a Saturday, Sunday, or legal holiday, the deadline is usually extended to the next business day.

Exact deadline dates for 2024

• Form 1098 due to the IRS - February 28 (or March 31 if filing electronically)
• Form 1098 due to the payer of record - January 31

Form 1098 late payment penalty

Failure to file Form 1098 on time or underreporting your tax liability can result in IRS penalties. For specific information about penalties, filers should refer to the General Instructions for Certain Information Returns. If you discover an error on a previously filed Form 1098, you would correct it by submitting a corrected Form 1098 with the appropriate changes. It's crucial to give yourself enough time to complete and file your Form 1098 by the January 31 deadline to avoid any potential penalties.

Step-by-Step Instructions for IRS Form 1098

Box Instructions

• Box 1: Enter the total amount of mortgage interest received from the borrower during the year.
• Box 2: Enter the outstanding mortgage principal as of January 1.
• Box 3: Enter the mortgage origination date.
• Box 4: Enter the amount of any refund of overpaid interest.
• Box 5: Enter any mortgage insurance premiums received.
• Box 6: Enter points paid by the borrower for the purchase of a principal residence.
• Box 7: Check if the property address securing the mortgage is the same as the borrower's address. If not, enter the address in Box 8.
• Box 8: Enter the address or description of the property securing the mortgage, if different from the borrower’s address.
• Box 9: Enter the number of properties securing the mortgage.
• Box 10: Use for other information as required by the filer.
• Box 11: If applicable, enter the date the lender acquired the mortgage.

Additional Details

• Filing Requirements: The form must be filed with the IRS by February 28th (or March 31st if filing electronically) and Copy B must be furnished to the payer by January 31st.
• Electronic Filing: Filers can submit forms electronically via the IRS Filing Information Returns Electronically (FIRE) system.
• Special Instructions: Check IRS publications and the official IRS instructions for Form 1098 for detailed guidance on reporting and exceptions.

How to file Form 1098

You can file Form 1098 either online or by mail. To file online, use the IRS's Filing Information Returns Electronically (FIRE) system by visiting https://fire.irs.gov/. You'll need to create an account and obtain a Transmitter Control Code (TCC) before filing electronically. To file by mail, complete the paper form and send it to the appropriate IRS address found in the General Instructions for Certain Information Returns, including any required copies of the form, such as Copy A for the IRS and Copy B for the payer of record. Online filing allows for faster processing and confirmation of receipt by the IRS, but may require additional steps like obtaining a TCC and using the FIRE system. Paper filing may be more straightforward for some filers but may take longer for the IRS to process. Electronic filing may also have different deadlines than paper filing.

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