IRS Instruction 1098 – In the world of tax reporting, understanding IRS forms is crucial for lenders, financial institutions, and anyone involved in mortgage transactions. One key document is Form 1098, also known as the Mortgage Interest Statement. This form helps report mortgage interest payments received, ensuring compliance with IRS regulations. Whether you’re a lender filing the form or a borrower using it for deductions, this SEO-optimized guide breaks down the IRS Instruction 1098, including who must file, how to complete it, due dates, and more. We’ll draw from official IRS sources to provide accurate, up-to-date information as of 2026.
What Is Form 1098 and Its Purpose?
Form 1098 is an information return used to report mortgage interest of $600 or more received during the calendar year in the course of a trade or business from an individual, including sole proprietors. It includes details like points paid and mortgage insurance premiums (MIP), if applicable. The primary purpose is to inform the IRS about interest payments that borrowers may deduct on their tax returns, while helping lenders comply with reporting requirements.
A “mortgage” under these instructions refers to any obligation secured by real property, such as land, buildings, or manufactured homes that meet specific criteria. This includes home equity loans and lines of credit. The form does not apply to non-mortgage loans or interest from corporations or partnerships, even if there are individual co-borrowers.
For borrowers, receiving a Copy B of Form 1098 from your lender allows you to claim eligible mortgage interest deductions on Schedule A of Form 1040, potentially reducing your taxable income.
Who Must File Form 1098?
You must file Form 1098 if you’re engaged in a trade or business and receive $600 or more in mortgage interest (or MIP under certain conditions) on any single mortgage from an individual during the year. This applies to:
- Financial institutions like banks and credit unions.
- Governmental units.
- Cooperative housing corporations (reporting interest allocable to tenant-stockholders).
- Collection agents who first receive the interest.
- Real estate developers providing financing for home purchases.
- Foreign interest recipients if the interest is connected to a U.S. trade or business or meets specific rules for controlled foreign corporations (CFCs).
Filing is not required for interest received outside a trade or business, such as on a personal mortgage for your residence. The $600 threshold is per mortgage, so separate forms are needed for each qualifying loan. You can optionally report amounts under $600, but then all rules apply.
Special cases include reporting refunds or credits of overpaid interest from prior years if they total $600 or more, and points paid on the purchase of a principal residence.
Step-by-Step Instructions for Completing Form 1098
The IRS provides specific line-by-line guidance in Instruction 1098. Here’s a breakdown based on the latest revisions:
General Filing Tips
- Use the April 2025 revision of Form 1098 for reporting 2026 information (interest received in 2025), filed in early 2027.
- File a separate form for each mortgage.
- Include the payer’s (borrower’s) name, address, and taxpayer identification number (TIN).
- Truncate the payer’s TIN on recipient statements for privacy, but use the full TIN on IRS filings.
Key Boxes on Form 1098
- Box 1: Mortgage Interest Received – Enter the interest (excluding points) received from the borrower. This includes payments on home equity loans secured by real property. Exclude government subsidies or seller-paid interest.
- Box 2: Outstanding Mortgage Principal – Report the principal balance as of January 1 of the reporting year (or the origination/acquisition date if new).
- Box 3: Mortgage Origination Date – The date the original lender originated the mortgage.
- Box 4: Refund of Overpaid Interest – Enter refunds or credits for prior-year overpayments totaling $600 or more.
- Box 5: Mortgage Insurance Premiums – Report MIP of $600 or more for qualified policies (e.g., FHA, VA, or private insurers on post-2006 contracts).
- Box 6: Points Paid – Include points paid directly by the borrower on a principal residence purchase, if they meet IRS criteria (e.g., listed on the Closing Disclosure and customary in the area).
- Boxes 7-8: Property Securing Mortgage – Provide the address or description of the property. Check Box 7 if it’s the same as the payer’s address.
- Box 9: Number of Properties – If the mortgage secures multiple properties, enter the count.
- Box 10: Other Information – Use for items like real estate taxes or collection agent details.
- Box 11: Mortgage Acquisition Date – If you acquired the mortgage during the year, enter the date.
For detailed examples and exceptions, refer to Publication 1099, General Instructions for Certain Information Returns.
Due Dates, Filing Methods, and Electronic Requirements
Due dates and filing procedures are outlined in Publication 1099. Generally:
- Furnish statements to recipients (borrowers) by January 31 of the year following the calendar year of interest receipt.
- File with the IRS by February 28 (paper) or March 31 (electronic) of the same year.
Electronic filing is mandatory if you file 10 or more information returns (aggregated across all types), a threshold lowered in 2023 per the Taxpayer First Act. Use the IRS’s Information Returns Intake System (IRIS) for e-filing, available at IRS.gov/IRIS. Paper filers send to the appropriate IRS center based on your location.
Corrected or void returns must be filed promptly. An online fillable Copy B is available at IRS.gov/Form1098 for recipient statements.
Penalties for Non-Compliance
Failure to file accurate and timely Forms 1098 can result in penalties, as detailed in Publication 1099. These include:
- Up to $310 per form for late filing or failure to file.
- Higher penalties for intentional disregard.
- Additional fines for not providing statements to recipients or for incorrect TINs.
To avoid penalties, ensure TINs are verified and use IRS-approved software for electronic submissions.
Recent Changes and Updates for 2026
The latest Instruction 1098 (Rev. December 2026) includes:
- Continuous-use revisions: Stick with the April 2025 form version until superseded.
- Reduced e-file threshold to 10 returns, effective since 2024.
- Introduction of the IRIS portal for easier e-filing.
- No major legislative changes noted for mortgage interest reporting, but always check IRS.gov/Form1098 for updates.
For prior years, use the corresponding revisions—do not mix versions.
How to Download the IRS Instruction 1098 PDF?
To access the full instructions, download the official PDF directly from the IRS website. This document provides comprehensive details, including examples and tables like the Obligation Classification Table.
Download IRS Instruction 1098 PDF Here
Related resources include Publication 1220 for electronic filing specifications and prior-year forms at IRS.gov.
Conclusion: Stay Compliant with IRS Form 1098
Mastering IRS Instruction 1098 ensures smooth tax reporting for mortgage interest. By following these guidelines, lenders can avoid penalties while helping borrowers maximize deductions. If you’re unsure about specific scenarios, consult a tax professional or visit IRS.gov for personalized advice. Remember, accurate reporting starts with understanding the form—download the PDF today and stay ahead of your 2026 filings.