What Is the Deadline for a Mortgage Interest Statement?
by Michael Marz
The fact that mortgage interest is tax-deductible may have played a role in your decision to buy your home. But unless you keep track of each payment yourself, you probably rely on the information reported on a mortgage interest statement – Form 1098 – that your lender mails to you each year. Realizing that taxpayers need this mortgage interest statement to complete their tax returns, the Internal Revenue Service imposes a deadline on lenders and charges penalties when it's ignored or forgotten.
Form 1098 Deadline
Mortgage lenders have an obligation to send you, and the IRS, a complete and accurate 1098 form when your annual mortgage interest payments total $600 or more. If preparing a 1098 is necessary, lenders have until Jan. 31 to send out the mortgage interest statement for the preceding tax year that ends on Dec. 31. But even if your interest payments are less than $600 -- it doesn't mean you can't deduct them just because you didn't receive a 1098.
Mortgage Lender Penalties
Given the penalties that mortgage lenders face for sending 1098s out late or not at all, there's incentive for them to provide you with a 1098 by the deadline. Therefore, the best way to deal with a missing 1098 is to call and remind your lender. If you don't receive the 1098 soon after, you may want to bring it to the attention of the IRS. Lenders who send mortgage interest statements within 30 days after the deadline can be charged $30 for each 1098. If the 1098 is sent after these 30 days, but by Aug. 1, the penalty increases to $60 for each form. And for mortgage interest statements sent after Aug. 1 or those not sent at all, the penalty is $100 per statement.
Form 1098 Information
With only five reporting boxes, Form 1098 is a relatively short information return. Box 1 is where mortgage lenders report your annual interest payments. And if the mortgage is for your main home, box 2 will report the deductible points for the year. Box 3 reports the amount of interest refunded or credited to your account because of a prior year overpayment – which you may have to report as income if it was previously deducted. The annual mortgage insurance premiums you've paid may also be deductible and are reported in box 4. Box 5 is reserved for any notes your lender wants to include on the 1098, so for purposes of preparing your taxes, you can ignore it.
Deducting Mortgage Interest
Getting your Form 1098 by the Jan. 31 deadline is generally a concern only if it makes sense to itemize deductions on Schedule A instead of taking the standard deduction and you're eligible to take a deduction for mortgage interest. To take the deduction, the mortgage funds must have been used to purchase a qualified home -- which is your main home plus one other home that's used for personal purposes. The mortgage lender must also retain a security interest in the home -- meaning the home serves as collateral in the event you stop making payments. If you satisfy these requirements and itemizing saves you more in tax than the standard deduction, you'll definitely want to make sure you get the 1098 by the deadline.
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