GARAGE Automotive, Business and Tax
1098 mortgage interest- Functions and Guides. The IRS or Internal Revenue Service issues many forms used by taxpayers to report various information. One of them is called 1098 mortgage interest. What is it? This statement is used by payers to report mortgage interest and related expenses paid within the tax year.
For taxpayers, this form is useful to calculate the amount of deduction they can get from the mortgage interest for that tax year. To get a better idea about it, I might talk about who can file it, how to get the deduction, how to file deduction, other related forms, and some common questions among payers.
Who Can File 1098 Mortgage Interest?
Well, two parties are involved in this form. First, it is the taxpayer or homeowner. If you (the owner of the home) paid at least $600 for points and interest on a mortgage in the last year, you will get form 1098 from the lender.
If the amount is less than that, nothing will be sent. Any receivers can later use it to get deductions on Schedule A or an income tax form. Once you qualify for the form, the lender or any entity receiving the mortgage interest may mail or issue it to the borrower. In this case, it will be sent to you.
The second is the lender itself. Based on the IRS’ policy, they have the obligation to issue the 1098 mortgage interest once the borrower qualifies the basic requirements. Aside from the minimum amount of interest of $600, other aspects apply.
For example, the property should be considered real property. What does it mean? By definition, it should be located, grown on, attached to, or built on the land. Not to mention it must meet IRS regulations.
Those standards are a building or space that has common living amenities. For instance, it should have a sleeping room, bathroom, and kitchen. According to the IRS modular, house trailers, boats, and mobile homes are qualified.
Also read : Things to Know about Daycare Tax Deduction: Requirements and Trivia
About the Deduction and How to File It
As mentioned earlier, the 1098 mortgage interest can be used to claim a deduction of the total taxable income owed to the IRS. Unfortunately, not all taxpayers understand the rules regarding deducting mortgage interest.
The primary qualification is that you must be the borrower and make payments on the house loan. If you file the claim and the debt is originated after 2017, it can only be done if the total mortgage is $750,000 or less.
What about the older debt? A special rule applies to this case, which is the limit of $1 million. If you qualify for all, you may need this 1098 mortgage interest form to reduce the interest of the home loan for the present-day tax year.
In some cases, someone may have two or more qualified mortgages. So, what can you do? The policy requires you to get a separate form for each mortgage that you have. Have no worries. The IRS website has all copies of it.
Understanding the Form
The thing is taxpayers can either include form 1098 with either tax returns or not. It is only useful when they want to deduct mortgage payments. During the tax return filing (online), you only need to enter information collected from the form into boxes provided in your tax return.
First-timers are likely to face problems when doing it. It is quite easy once you find out what all those boxes represent.
- Box number one shows how much interest is paid to the lender for the year. That means it includes the amount of mortgage interest received from the borrower.
- Box number two shows the amount of loan principal or how much is owed. It represents an outstanding mortgage principal.
- Box number three on the 1098 mortgage interest form shows the date when the mortgage is made or originated. It simply represents the origination date of the mortgage.
- Box number four shows the list of overpaid mortgage interest. It is all about the refund of overpaid interest.
- Box number five shows the amount of paid private mortgage insurance. It is related to mortgage insurance premiums.
- Box number six shows mortgage points borrowers may be able to reduce.
- Box number 7 until 11 shows details or information related to the property and the mortgage in a nutshell.
Frequently Asked Questions (FAQ)
You can understand it better by reading some frequently asked questions below:
What is the 1098 form used for?
This form states or reports the total interest amount paid on the mortgage during the past year.
How do you get it?
Once you qualify it, the home loan lender sends it to you through email or other methods. The date varies, but it is usually by the end of the first month of the filing year.
Is it compulsory?
No, it is not. You don’t have the obligation to submit it along with your tax return. You can do this if you plan to itemize deductions on personal tax or tax returns.
Similar Types to Learn
Well, other forms have a relation to 1098 mortgage interest. You might need to learn them as well. They are:
1098-C
This covers information regarding vehicles given to the needy or sells them cheaply for the sake of charity. The recipient organization should report and file this form, especially about the details of the vehicles.
1098-E
This one covers information regarding student loans interest that qualifies during the tax year.
1098-T
This form shows information about the college fees within a tax year and can be used to reduce taxes that apply in the educational system.
Summary
From the information above, you can conclude that the 1098 form is mainly used to report home loan interest paid for the year. The one who issues this is the lender when the borrower has paid at least $600 during the tax year.
It is possible to use it for itemizing deductions for tax returns and claiming interest deduction for the home loan. The primary qualifications are the borrower status and has been actively making payments.
All the explanations given in this article may help those who have no experience in filing a 1098 mortgage interest form. You can also learn more from other sources later. Good luck with it!
Originally posted 2022-07-01 07:02:37.
