Form 1098, Mortgage Interest Statement, is an IRS tax form that is used to report mortgage interest a lender received during the year. Mortgage interest is the amount of interest that the borrower pays in a year on a loan secured by real property. The reported amount can include points paid by the borrower at the time of purchase of a primary residence. The amount reported on Form 1098 includes mortgage interest, points, certain mortgage insurance premiums, and reimbursements of overpaid interest.
The lender is required to file Form 1098 Mortgage Interest Statement if the amount received is $600 or more during the year. The lender is required to furnish Form 1098 to the borrower and to the IRS.
Form 1098 provides information related to the points and interest to the borrower and the IRS. A borrower, who receives Form 1098 indicating the amount of mortgage interest and points paid, can deduct this amount from the income.
Who needs to file Form 1098?
Any person who is engaged in a trade or business and in the course of such trade or business receives mortgage interest of $600 or more from an individual. The trade or business need not be mortgage lending. Therefore, not only mortgage lenders, but any entity who receives mortgage interest, such as real estate developers, servicers, or certain collection agents. See the official IRS instructions for Form 1098.
When is Form 1098 filed?
Mortgage Interest: Form 1098 is required if the recipient receives mortgage interest and points of $600 or more from an individual during a year.
Points: Points paid for the purchase of the borrower's principal residence are reported on Form 1098 if the points and other interest on the mortgage are $600 or more. For points to be included in Form 1098, they must be calculated as a percentage of the loan amount and identified in the Settlement Statement (HUD-1) as a “loan origination fee”, “loan discount,” “discount points,” or “points.” Points paid on a vacation home, investment home, or second home are not reported in Form 1098. For complete details on reportable points, including points on a construction loan, see the IRS Instructions for Form 1098.
Repayment of Overpaid Interest: Form 1098 is required to be filed if the amount of overpaid interest that was repaid to the borrower is $600 or more. If the lender is required to furnish Form 1098 because the lender received at least $600 in interest, then the lender must include the amount of overpaid interest, even if it the repayment was less than $600.
Borrower’s Ability to Claim Deduction: Form 1098 is filed regardless of whether the borrower can claim a deduction for mortgage interest.
Loan Classification: Form 1098 is issued for any mortgage loan, as long as the obligation is secured by real property. Therefore, the lender’s classification of the loan does not matter.
Non-resident Aliens: For non-resident aliens, Form 1098 is filed only if all or part of the security for the mortgage is real property located in the United States.
Deadline to file Form 1098
The deadline to file Form 1098 with the IRS is the end of February. If filing electronically, then the due date to file form 1098 is the end of March. The deadline to provide a copy of Form 1098 to the borrower is the end of January. Form 1098 is filed in the year after the mortgage interest or points were received.