Happy Tax Day! Do You Have Your Form 1098?
No one looks forward to tax time, but if you're a first-time home owner you might have a nice little surprise coming your way this year! This is the first time you'll be able to take advantage of mortgage interest tax deductions when you file. All you need is one little form.
What is a Form 1098?
A Form 1098 is a tax form homeowners can use to report $600 or more of mortgage interest over the course of a year.
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When won't you get a Form 1098?
Unless your interest rate is crazy low, you put a huge down payment on your home, and/or you bought a really inexpensive house, you probably paid more than $600 in interest last year.
But maybe you're one of the lucky ones! Or maybe you have a second loan, based on your equity, that you've used to do a little remodeling, put a down payment on a second home, or pay some expenses for the kids, like tuition, and you only paid $350 in interest last year.
Your lender won't send a Form 1098 unless you paid at least $600 in interest. If you paid less than that, can you still deduct the interest on your taxes?
Can you deduct less than $600 in mortgage interest?
Why, yes. Yes, you can! Though there are some limitations, you can likely deduct any amount of interest you paid last year on a loan that was secured by your home.
After determining how much you paid - by asking your lender, logging on to your account, or looking through your statements - you can enter that amount on your tax return.
Without a Form 1098, be prepared to enter the name and tax identification number of your lender. If you borrowed from an individual, that will be their social security number, and if you borrowed from a bank or other business, you'll need their employer identification number (EIN). Make sure you keep documents that substantiate your claim, in case of an audit.
So, today's the big day! Have you filed your taxes yet? And did you take every deduction you could?
For more information on deducting the interest from your mortgage or home equity line of credit or loan, as well as tax information about points and mortgage insurance, take a look at this IRS publication for the rules.