What is the Form 1098?
Form 1098 reports the amount of interest you paid toward your mortgage during the tax year. Lenders typically have to issue the form if you paid $600 or more in interest during the year. The form includes the following information:
- Mortgage interest paid
- Outstanding mortgage principal
- Mortgage insurance premiums
- Points paid on purchase of principal residence
Whether you can deduct the mortgage interest depends on whether you itemize your deductions and other considerations.
Why would I receive two Form 1098s?
You may receive multiple Form 1098s for the following reasons:
- Your mortgage was transferred or sold: Sometimes, lenders and loan servicers sell or transfer loans to other companies. If that happens, you may receive a Form 1098 from each company that handled your loan during the tax year.
- You refinanced your mortgage: Refinancing replaces your existing mortgage with a new loan. As a result, you may receive a Form 1098 from the previous lender and your current one.
- Your lender made a correction: If your lender discovers an error, it may send an updated Form 1098. In this case, discard the original and use the latest version.
How do I handle the Form 1098 if there is a co-borrower?
If two people who are unmarried own a home and pay interest, both can deduct the portion of the interest they paid on their tax return. To qualify for the deduction, the owners must have a legal responsibility for paying the mortgage.
The lender may send the form to just one of the owners. If that happens, the person who is not named can claim their portion of the interest paid by submitting the amount of mortgage interest they paid on their Schedule A (Form 1040), line 8B, as “home mortgage interest not reported to you on Form 1098.”
How to report two 1098 forms on your tax return
If you itemize your deductions rather than use the standard deduction and plan to claim the mortgage interest tax deduction when you file your taxes, here’s how to handle two 1098 forms:
- Review both forms: Determine which lender or loan servicer issued them and check that the amounts reported match your records. If you find any discrepancies, contact the lender.
- Exclude duplicate amounts: If the interest you paid is reported on both forms, exclude the duplicate amounts to get an accurate number for the deduction.
- Fill out Schedule A: Fill out the necessary fields on Schedule A so that the total itemized deductions will transfer to your Form 1040.
You don’t need to include an explanation for the division of interest, but keep copies of the form and supporting documents (like previous mortgage payment statements) for your records.
