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What is IRS Form 1098?

IRS Form 1098 is also known as the Mortgage Interest Statement.  The form is used to report mortgage interest of $600 or more (including certain points) that was earned in the calendar year.  The lender is the payer while the borrower is the payee.

The form contains 3 pages of information and is usually held together by a perforated edge.  The first page is Copy A.  Copy A is a red-ink form.  If you are paper filing, you can print your data on top of Copy A and mail the Form 1098 along with the 1096 to the IRS. Copy B is sent to the borrower.  Copy B can be printed on plain paper with black ink.  Copy C is retained by the lender and can also be printed on plain paper with black ink.

The top part of the form asks for the lender name, address, phone number and TIN.  Then the borrower name, address and TIN followed by the account number.

There are 4 boxes on the IRS 1098 form.  Each box is discussed below:

Box 1:  Shows the mortgage interest paid from the borrower to the lender during the calendar year. This amount does not include points, subsidies or any deductibles.

Box 2: Shows the points paid on purchase of principal residence.  What are mortgage points?   A mortgage point is a charge that the borrower pays in order to obtain a mortage on a home.  One mortgage point is a fee that is 1% of the total amount of the loan.  Lets say the borrower wants to borrow $250,000 to purchase a house.  One point on a $250,000 loan is $2,500.  Mortgage points are tax deductible as a home mortgage interest if the deductions are itemized on Form 1040, Schedule A.

Box 3: Shows any refund of overpaid interest that the borrower made in a prior year or years. The borrower can not deduct this amount.

Box 4 is blank and can show any additional information that the lender in this case wants to show on the form.  You can show the property address, real estate taxes or insurance paid from escrow or anything else.

The borrower may deduct only the amount she or she paid and points paid by the seller that represent his or her share of the amount allowable as a deduction.

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Erich J. Ruth

Erich J. Ruth provides technical support for National Software which is the parent company for 1099FIRE. 1099FIRE develops and markets a comprehensive range of products that enables any size of business or institution to effectively manage and comply with year-end filing requirements. 1099FIRE is an employee-owned company located in Phoenix, Arizona.

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