Understanding Form 1098 Boxes: Reporting Requirements Explained

Form 1098 is the Internal Revenue Service’s (IRS) standard Mortgage Interest Statement. It is the official IRS information return that lenders use while reporting specific payments received during the year.

Form 1098 – Basic Details

Let’s start with the basic information that you must know about Form 1098:

• Usage: Form 1098 is used to report the receipt of mortgage interest, prepaid interest in the form of discount points (including certain origination charges treated as points), refund of overpaid interest, mortgage insurance premiums paid during the year, the outstanding mortgage principal as of January 1 of the year (or as of the origination/acquisition date if the loan began or was acquired during the year), and the property that secures the mortgage.
• Who must prepare it: If you are in business and you received $600 or more in mortgage interest on a single mortgage from an individual during the year, you must file Form 1098. It is not required, but filing is optional if the payment is below $600. This includes lenders, servicers, co-ops, and government units.
• Separate forms or consolidated: Each mortgage with interest payments of $600 or more is reported in a separate Form 1098.
• Mortgage: It is the obligation that is secured by real property.
• Benefit for the payer: You can deduct eligible mortgage interest only if you itemize on Schedule A (see Pub. 936). If you take the standard deduction, it doesn’t reduce your taxes.
• Deadline: IRS rules require that Copy B of Form 1098 has to be furnished on or before January 31. If the deadline day is a weekend or a holiday, the next business day becomes the deadline day.
• Copies: Copy A is for the IRS, Copy B is for the payer/borrower, and the filer keeps a copy for their records.

A Visual Walkthrough of Form 1098 Boxes

Header checks:

• Recipient/lender’s name and details: These boxes capture the lender’s name, address, and phone number.
• Recipient/lender’s TIN: The lender’s unique tax ID appears in this box. For the IRS, it acts as a reference point for linking the lender and the interest payment details with the form.
• Payer/borrower’s details: Just like the recipient’s information mentioned above, the payer’s information is spread across these boxes for name, TIN, and address.

Numbered boxes:

Box 1: Mortgage Interest received from payer/borrower:

It captures the mortgage interest paid by the borrower. Whether and how much is deductible would depend on the Schedule A rules and Pub. 936. Do note that the amount shown may not be fully deductible. One can verify the amounts in the box with the year-end mortgage statement.

Box 2: Outstanding mortgage principal

Form 1098, Box 2, shows the principal balance of the mortgage at the beginning of the tax year.

• Mortgage acquired during the year: The mortgage principal amount as of the acquisition date is applicable.
• Mortgage originates in the current year: The mortgage principal as of the date of origination is mentioned.

Box 3: Mortgage origination date

It is the date of mortgage issuance, which is significant if the payer has paid points, i.e., prepaid fees, and plans to get a deduction against the same.

Box 4: Refund of overpaid interest

The total amount of refund or credit against an overpayment of interest in prior year(s) is mentioned here. This amount ensures that the payer’s interest deduction claim is not overstated.

Box 5: Mortgage Insurance Premiums

This box indicates the premium amount paid for mortgage insurance during the year. Report mortgage insurance premiums in Box 5 only if section 163(h)(3)(E) applies for the tax year; if it applies, enter total premiums of $600 or more (including prepaid).Qualified mortgage insurance is defined in the Homeowners Protection Act. It may include payments related to the VA, FHA, RHS (or successors), and/or private mortgage insurance.However, reporting in Box 5 is required only if section 163(h)(3)(E) applies for that year.

Box 6: Points paid on purchase of principal residence

Any up-front fee, paid possibly to lower the interest rate, is mentioned here. Certain points are deductible in the year in which they are paid, while others are spread over the life of the mortgage. This is subject to IRS Form 1098 instructions and rules.

Boxes 7–8: Property address details

The property securing the mortgage may be the same as the payer’s address, or it could be a different property altogether.

• If it is the same, you may check the Box 7 indicator or leave it blank and complete Box 8 — both are acceptable.
• If different, the address or description of the property has to be mentioned in Box 8.

Box 9: Number of properties securing the mortgage

It captures the number of properties attached to secure the mortgage.

Box 10: Other

Form 1098, Box 10, is meant for any other additional information. For example, a collection agent may fill in the name of the person on whose behalf the interest was collected.

Box 11: Mortgage Acquisition Date

Box 11 is filled only if the lender acquired the loan from another lender or servicer during the year. If the loan acquisition took place during the year, the payer of the loan interest often ends up receiving 1098s from both the lenders/institutions.

Filing Checklist for Form 1098

• Always prepare, share, and obtain the form on or before January 31.
• Payers should remind their lenders of Form 1098s that have not been shared yet.
• Both parties should check the names, SSN/TIN, and amounts mentioned on the year-end mortgage statement.
• In case of any mismatch between Form 1098 and the year-end statement, amendments to the issued form must be made.
• Always verify the treatment of points and find out if they are outright deductible or are to be amortized over the mortgage span.

FAQs

Do escrow payments go on Form 1098?

Filers may use Box 10 ‘Other’ to report information such as real estate taxes or insurance paid from escrow.

Is Form 1098 required if mortgage interest payments are below $600?

No. You must file Form 1098 only when $600 or more of interest is received on any one mortgage.

Is it compulsory to issue Form 1098 electronically?

You must e-file with the IRS if you’re filing 10 or more information returns in aggregate (all 1099/1098/W-2G, etc.) for the year. This 10-return rule applies to returns due on or after January 1, 2024. Copy B is furnished electronically only with the recipient’s affirmative consent.

What if I issue Form 1098 late?

For returns due in 2025: $60 per form if corrected within 30 days, $130 if after 30 days but by Aug 1; $340 if after Aug 1 or not filed; and $680 per form for intentional disregard (no cap). Similar tiers apply to recipient statements.

Do I report mortgage insurance premiums on Form 1098?

Report MIP in Box 5 only if section 163(h)(3)(E) applies for that year (see current Form 1098 instructions).

Final Thoughts

Once all the Form 1098 boxes are well understood, preparing and verifying the form becomes easier. To make this filing process even more hassle-free, start filing your Form 1098s with Tax1099 today!