IRS Form 1098: Mortgage Interest Statement
If you are in the business of lending money and receive mortgage interest from a borrower, the IRS requires you to document it. Form 1098 is the official Mortgage Interest Statement used to report interest, points, and mortgage insurance premiums paid by a homeowner. Whether you are a large financial institution or a private lender managing a seller-financed property, understanding this form is crucial for federal compliance.
What Exactly is Form 1098?
Form 1098 is an informational return used by the IRS to track mortgage interest payments. Homeowners use the copy you provide to claim the mortgage interest deduction on Schedule A of their individual tax returns. It covers standard mortgage interest, prepaid interest (points), and mortgage insurance premiums (MIP). For example, if a borrower paid you $4,500 in interest over the tax year for their primary residence, you must generate a Form 1098 to report that exact figure to both the borrower and the IRS.
Who Must File It?
Any individual, partnership, corporation, or entity engaged in a trade or business that receives $600 or more in mortgage interest from an individual borrower during the calendar year must file this form. This includes traditional banks, credit unions, and mortgage servicers. It also applies to real estate developers or private individuals acting as lenders in a seller-financed mortgage, provided the lending activity is considered a regular trade or business.
Detailed Form Walkthrough
Lender and Borrower Details
The left side of the form requires the lender's (filer's) name, address, and Taxpayer Identification Number (TIN). You must also provide the borrower's (payer's) TIN, name, and the address of the property securing the mortgage. Common error: Failing to secure the borrower's correct Social Security Number (SSN) can result in IRS penalties.
Box 1: Mortgage Interest Received
This is the core of the form. Enter the total amount of interest received from the borrower during the year. Do not include points in this box; it is strictly for standard interest payments.
Boxes 2 & 3: Principal Balance and Origination Date
Box 2 asks for the outstanding principal balance on the mortgage as of January 1 of the reporting year. Box 3 requires the exact date the mortgage was originally secured.
Boxes 5 & 6: MIP and Points
If the borrower paid Mortgage Insurance Premiums (MIP), report the total in Box 5. If they paid points (prepaid interest) to secure a new loan or refinance, report that figure in Box 6.
What to Have Ready
- Lender's EIN/TIN
- Borrower's SSN/ITIN
- Property address
- Total interest received
- Outstanding principal balance
- Points or MIP paid
Deadlines and Filing Rules
Timing is critical when handling Form 1098. You have two distinct deadlines to manage:
- 1
Copy B to Borrower: Must be furnished to the homeowner by January 31 of the year following the tax year.
- 2
Copy A to the IRS: Typically due by February 28 if filing by paper, or March 31 if filing electronically. Always check with the Internal Revenue Service (IRS) for the current year's exact deadline, especially if dates fall on a weekend.
How to Fill Out Form 1098 on AmendSign
- Enter Party Information: Input the lender's and borrower's names, addresses, and tax ID numbers securely.
- Input Financial Data: Fill in the specific amounts for interest, principal balance, and points using your accounting records.
- Review and Sign: Double-check all figures for accuracy. Use our e-signature tool to finalize the document.
- Download and Distribute: Export the finalized PDF to print and mail to the borrower, and retain a copy for your IRS filing.
Frequently Asked Questions
No. The IRS only requires lenders to issue and file Form 1098 if the total mortgage interest received from a single borrower equals or exceeds $600 during the calendar year.
Who actually fills out Form 1098: the homeowner or the bank?▼The lender or financial institution (the bank, credit union, or private lender) is responsible for generating and filling out Form 1098. The homeowner simply receives a copy to use when preparing their personal taxes.
Can I use Form 1098 for a commercial property?▼Form 1098 is primarily used to report interest received from individuals (including sole proprietors). If the borrower is a corporation, partnership, trust, or estate, you generally do not have to file Form 1098, even if the property is commercial.
What happens if I file Form 1098 late?▼Failing to file on time, or failing to furnish the statement to the borrower by the January 31 deadline, can result in IRS penalties. These penalties increase the longer the form is past due, ranging from $60 to over $310 per form depending on how late it is filed.
Are property taxes included on Form 1098?▼Box 10 is reserved for "Other," where lenders sometimes report real estate taxes paid from an escrow account. However, reporting property taxes on Form 1098 is not strictly required by the IRS, though it is a helpful courtesy to the borrower.