Realtor.com writes, "Tax season can be very stressful for many Americans—and for homeowners, having a place to call home can add another layer of complexity.
Sure, several tax breaks are available to owners. However, navigating them, finding the appropriate forms, and ensuring you do not forget any deductions can be challenging.
Recently, a real estate expert posted a TikTok video reminding homeowners that one of these tax forms could actually help them get a tax bonus this year. The video was liked more than 26,000 times, underscoring taxpayers’ interest in understanding deductions as much as possible.
Real estate agent warns not to throw out your recent mortgage statement
TikTok user and mortgage expert @loanladyliz explained that there is one specific form that homeowners should pay particular attention to.
“When you open up your mortgage statement this month, do not throw this form away,” she said in the video.
This 1098 form shows the mortgage interest you pay on your house, and if you qualify, you could write off that interest, she explained.
“One of the benefits of the mortgage interest you pay on your house is it can reduce your taxable income if you itemize deductions on your tax return,” she continued. “This means you subtract the interest paid from your income, potentially lowering your overall tax liability.”
What is Form 1098?
The Form 1098 is “to report mortgage interest of $600 or more received by you during the year in the course of your trade or business from an individual, including a sole proprietor,” according to the IRS. It usually becomes available to mortgage holders in January for the year prior.
Greg Clement, CEO of Realeflow, explains that this form shows exactly how much interest you paid on your home loan during the year.
“Think of it as your annual ‘interest report card’—an essential document if you plan to itemize deductions on your taxes,” he says.
This form is extremely important and a “heavyweight” in the deductions arena, especially early on, he adds. For instance, new homeowners are likely paying a lot of interest, which means the Form 1098 can significantly lower their taxable income.
“Sure, there are other deductions—like property taxes and even some energy-efficiency credits—but for many, mortgage interest stands out as one of the biggest opportunities to save at tax time,” he adds.
Lenders send this form to owners who have “paid more than $600 toward interest during the tax year,” Jackson Hewitt explains.
“Whether your mortgage is for your primary residence, a second home, or even an investment property, you will get this form if you meet the $600 threshold,” it adds.
A critical caveat to being eligible is that you must choose to itemize your deductions instead of taking the standard deduction.
The standard deduction for the 2024 tax year is $13,850 for single filers and $27,700 for married couples filing jointly, according to the IRS.
Mark Luscombe, CPA, attorney, and principal analyst at Wolters Kluwer Tax & Accounting, notes that the mortgage interest deduction can be one of the most significant itemized deductions for the year.
“However, only about 10% of taxpayers itemize deductions. The rest claim the standard deduction,” he says. “Therefore, the mortgage interest deduction is of no tax benefit to those claiming the standard deduction.”
How much can you deduct?
This tax break is one of the most common for owners who itemize deductions.
You can deduct home mortgage interest on the first $750,000—or $375,000 if married filing separately —of debt, according to the IRS. If your loan dates before Dec. 16, 2017, the cap is higher: $1 million, or $500,000 if married filing separately.
The IRS has different filing statuses, affecting several things, such as your tax owed, the credits you can claim, and whether you can get a refund.
They include the following: single; married filing jointly; married filing separately (“if you’re married and don’t want to file jointly or find that filing separately lowers your tax”); head of household if you’re single and you paid more than half of your living expenses for yourself and a qualifying dependent; and qualifying surviving spouse.
Depending on your situation, you might want to itemize or take the standard deduction, which is more straightforward. However, taking the time to do the math can be extremely rewarding.
“If a married couple had a $500,000 mortgage outstanding for 2024 at 7%, the quick approximation would indicate $35,000 of deductions,” Kevin Leibowitz, president and CEO of Grayton Mortgage, says.
This is in excess of the standard deduction in this situation, he says.
“When a taxpayer can write off more expenses, then they reduce their tax bill,” adds Leibowitz.
How does Form 1098 change year over year?
The figures reported on Form 1098 might vary annually as mortgage balances decline and the interest-to-principal ratio shifts over the life of the loan.
“New homeowners often benefit more in the early years, when the majority of mortgage payments are allocated toward interest, thereby maximizing the potential deduction, “ says attorney and CPA Chad D. Cummings, of the firm Cummings & Cummings Law.
Eric Schwarberg, a tax attorney at TurboTax, also notes that your Form 1098 will change from year to year as you pay more or less interest.
He adds that, in general, the amount of interest you pay will decrease over time as your mortgage balance decreases and more of your payments go toward the principal loan balance than interest.
“However, persons with variable rate mortgages may pay more or less interest each year due to interest rate fluctuations,” he says. “Additionally, if you pay property taxes through your mortgage, your 1098 may show more taxes paid based on increases to your property taxes.”
In turn, he notes that newer homebuyers will have more of their payments allocated to interest and may benefit more than homeowners who have nearly paid off their mortgage.
“But depending on filing status, amount of interest, and other itemized deductions, it may still be an important deduction for homeowners who are close to paying off their balance, too,” he adds.
Other forms you’ll need at tax time
As Clement notes, Form 1098 is the “quarterback,” but don’t forget the supporting cast:
Schedule A (Form 1040) – itemized deductions
Cummings says that homeowners who choose to itemize deductions must complete Schedule A, documenting expenses such as mortgage interest, property taxes, charitable contributions, and qualified medical expenses.
“It is essential to maintain detailed records, including tax bills, receipts, and bank statements, to support these deductions in the event of an audit,” he advises.
Form 1040 – U.S. Individual Income Tax Return
He adds that this is the primary form used to file your annual income tax return, which incorporates all income sources and deductions.
Form W-2 – Wage and Tax Statement
Employers issue this form and report your annual wages and taxes withheld, which are necessary for calculating overall tax liability. Homeowners should keep copies of their W-2s alongside other financial documentation for a complete tax record.
Form 1099-INT/1099-DIV – Interest and Dividend Income Statements
Cummings says these forms are available on the IRS website, through reputable tax software providers, or from a qualified tax professional.
“Homeowners are advised to gather and review all relevant documentation to ensure they take full advantage of any tax benefits available to them,” he adds."
Source: Realtor.com
Written by: Yael Bizouati-Kennedy
Published: February 5, 2025
Posted by Grossman & Jones Group on
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