A Primer on Mortgage Interest Statements (IRS Form 1098)

Very soon, this blog will begin covering all of the significant personal income tax forms—after all, April 15 is really right around the corner now. But just before the final 30-day crunch might be a good time to look more closely at some forms that are a bit confusing or maybe misleading. IRS Form 1098 (not to be confused with Form 1098-T) is a good example. This form, meant for reporting interest collected on mortgages to the IRS, seems at first glance to apply very broadly, but when you dig into it more deeply, you’ll find the circumstances where it applies to be quite specific. We’ll cut to the chase.

Here is who does not need to file an IRS Form 1098: people paying (as opposed to receiving) interest on a mortgage; people receiving mortgage interest on any one mortgage in amounts under $600 annually; people receiving mortgage interest from mortgages on boats or mobile homes; and people receiving interest from mortgages held by a corporation, partnership, trust, estate, association or company that is not a sole proprietorship. If you receive less than $600 worth of interest payments from any one mortgage, even if you receive less than $600 in interest payments from many mortgages, you do not need to file IRS Form 1098.

You will need to file an IRS Form 1098 if you are the recipient of any mortgage interest that totals over $600 annually—with some exceptions, this is true even if you are the intermediary collector, and not the final recipient of the funds. If you do receive mortgage interest of more than $600, you will need to to file the form whether you are a bank, a private individual, a company, a government agency, or even a cooperative housing corporation.

With a few exceptions, in addition to reporting mortgage interest that was paid when due or after the fact, you must report any mortgage “points” you receive as well, if the points or combination of points and traditional interest payments add up to $600. If the mortgage is on a property outside of the United States and you receive interest payments in the United States (or the payments are made to a business based in the United States) you will need to file IRS Form 1098. The reverse is true as well—if you receive interest payments for a mortgage on a property within the United States, but you are not resident in the United States, you will still need to file Form 1098 with the IRS.

The video that follows offers comprehensive instructions for completing IRS Form 1098, Mortgage Interest Statement.

A copy of IRS Form 1098 needs to be sent to the interest payer, and is used (along with IRS Form Schedule A,) to claim the Mortgage Interest Deduction on IRS Form 1040, and variants of this form. The use of IRS Form 1098 (and IRS Form 1098-T) to claim deductions will be addressed in a future blog post, so stay tuned!