How to Use Form 1098 for Taxes: Itemize, Points, and Schedule A

To use Form 1098 for taxes, take the mortgage interest reported in Box 1, decide whether itemizing beats your standard deduction, and if it does, enter that amount on Schedule A of your Form 1040. The form itself is just an information return your lender is required to send when you paid more than $600 in mortgage interest during the year.¹ It does not reduce your taxes on its own. You have to claim the deduction, and the deduction only exists if you itemize and the underlying debt qualifies.

Read the Boxes on Your Form 1098

Before doing anything with the form, confirm your Social Security number and property address match your records. A mismatch between what you report and what your lender reported can trigger an IRS automated comparison and a CP2000 notice proposing changes to your return.²

The boxes that matter at tax time:

Box 1 is the total mortgage interest the lender received from you during the year. This is the main number that moves to Schedule A.
Box 2 is your outstanding principal as of January 1 of the tax year, or the origination date if the loan is new. You need this to check whether your balance is under the debt limit.
Box 5 shows any mortgage insurance premiums paid. Deductibility of this amount has been on and off across tax years and is subject to income phaseouts, so check current IRS guidance before claiming it.
Box 6 shows points paid on the purchase of a principal residence.
Box 10 typically shows property taxes paid out of your escrow account, which go on a different line of Schedule A.

Decide Whether to Itemize

Mortgage interest only lowers your tax bill if your total itemized deductions exceed your standard deduction. For tax year 2026, the standard deduction is $16,100 for single filers, $32,200 for married filing jointly, and $24,150 for head of household.³ A married couple filing jointly needs more than $32,200 in combined itemized deductions — mortgage interest, state and local taxes, charitable gifts, and medical expenses over 7.5 percent of adjusted gross income — before Form 1098 delivers any actual tax savings.

The state and local tax deduction is also capped. For 2026, the SALT cap is $40,400 for most filers and $20,200 for married filing separately, and it phases down at higher incomes: once modified adjusted gross income exceeds $505,000, the cap shrinks by 30 cents for every dollar above the threshold, with a floor of $10,000.³ So even if Box 10 of your 1098 shows a large property tax figure, it might not all count toward beating the standard deduction.

Run this comparison each year. Mortgage interest shrinks over the life of a loan as more of each payment goes to principal, so an owner who itemized early on may find the standard deduction eventually pulls ahead.

Confirm the Interest Actually Qualifies

Not every dollar in Box 1 is deductible. Federal law under 26 U.S.C. § 163(h) limits the deduction to interest on “acquisition indebtedness” — debt you took on to buy, build, or substantially improve a qualified home, secured by that home.⁴ The IRS doesn’t care what kind of loan you have. It cares what you used the money for. A home equity line used to renovate a kitchen produces deductible interest. The same line used to pay off credit cards or buy a car does not, even though it still shows up on your Form 1098.

A qualified home is your primary residence or one second home you designate. It can be a house, condo, co-op, mobile home, boat, or RV, so long as it has sleeping, cooking, and toilet facilities. If you rent out the second home, you also need to use it personally for the greater of 14 days or 10 percent of the rental days that year.⁵

There’s a cap on how much mortgage debt qualifies. For loans originated after December 15, 2017, you can deduct interest on up to $750,000 of combined acquisition debt across your primary and second home ($375,000 if married filing separately). This limit is now permanent.⁶ Loans closed on or before that date keep the older $1 million cap ($500,000 married filing separately), and a refinance of grandfathered debt generally keeps the higher limit up to the original balance. Anything borrowed beyond that original balance falls under the $750,000 cap.

If your total balance exceeds the applicable limit, you have to prorate. Divide the limit by your average balance for the year, then multiply by total interest paid. IRS Publication 936 has worksheets, and most tax software handles the math once you enter the loan details.

Handle Points in Box 6

Points paid when you bought your primary home are generally deductible in full in the year you paid them, provided the loan is secured by your main home, the points are computed as a percentage of the loan amount, charging points is standard practice in your area, and the amount is in line with local norms. You also need to have brought enough funds to closing — through down payment, earnest money, and other payments — to cover at least the points charged.⁵ Points meeting those conditions appear in Box 6.⁷ Seller-paid points are still deductible by you, but you must reduce the home’s cost basis by that amount, which affects the gain calculation when you sell.⁸

Points paid to refinance follow different rules. You generally cannot deduct them all at once. Instead, you spread the deduction evenly over the life of the new loan. Points on a 30-year refinance of $3,000 come to $100 a year.⁵ One exception: if part of the refinance proceeds substantially improves your main home, the portion of points tied to the improvement can be deducted in full that year if it meets the purchase-points tests. The rest still gets amortized.

When you refinance again or pay off a refinanced loan, any unamortized points from the old loan become deductible then. If the new lender is different, you deduct the remaining balance in the year the old loan is paid off. If you refinance with the same lender, the leftover points get added to any new points and amortized together over the new loan’s term.

Enter the Numbers on Schedule A

Once itemizing makes sense, transfer the deductible mortgage interest from Box 1 to Schedule A (Form 1040), line 8a. Deductible interest not reported on a Form 1098 — for example, interest paid to a private seller who financed the purchase — goes on line 8b along with the payee’s name, address, and taxpayer identification number. Deductible points not reported on a Form 1098 go on line 8c.⁵

If you received more than one Form 1098 because you refinanced, changed servicers, or hold multiple mortgaged properties, enter each one separately. Tax software prompts you to add additional forms and combines the totals on Schedule A. When your loan balance exceeds the debt limit, the software also handles the proration once you enter each loan’s details.

The total from Schedule A flows to Form 1040, line 12e, and reduces your adjusted gross income to arrive at taxable income.⁹ Attach Schedule A if you paper file; electronic returns transmit it automatically. Keep the Form 1098 along with settlement statements, refinance closing documents, and any records showing how loan proceeds were used, for at least three years after filing.

Fixing a Wrong Form 1098

Lenders occasionally report the wrong interest total, attribute payments to the wrong borrower on a joint loan, or misallocate figures after a mid-year loan transfer. If your numbers don’t match the form, contact your servicer and request a corrected 1098 before filing.

Don’t just file with your own figures and ignore the discrepancy. The IRS matches the interest you claim on Schedule A against what your lender reported. A mismatch triggers the Automated Underreporter system and a CP2000 notice, which carries interest charges from your original filing deadline and possible penalties on top.²

If the lender won’t correct the form and you’re confident your figures are right, report the deductible interest on Schedule A line 8b instead of 8a, attach a written statement explaining the difference, and write “See attached” next to that line.⁵ That puts the IRS on notice you’re aware of the gap and have documentation.

Business Use of Your Home

If you’re self-employed and use part of your home regularly and exclusively for business, a portion of your mortgage interest shifts from Schedule A to your business return, based on the percentage of square footage dedicated to business use.¹⁰ That business portion reduces self-employment income directly, which can be more valuable than an itemized deduction, especially if you wouldn’t otherwise clear the standard deduction. Employees working from home for an employer’s convenience cannot claim this under current rules.

1
Office of the Law Revision Counsel. 26 USC 6050H – Returns Relating to Mortgage Interest Received in Trade or Business From Individuals
2
Internal Revenue Service. Topic No. 652, Notice of Underreported Income – CP2000
3
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill
4
Office of the Law Revision Counsel. 26 USC 163 – Interest
5
Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction
6
Library of Congress. Selected Issues in Tax Policy – The Mortgage Interest Deduction
7
Internal Revenue Service. Instructions for Form 1098 (Rev. December 2026)
8
Internal Revenue Service. Topic No. 504, Home Mortgage Points
9
IRS.gov. Schedule A (Form 1040) – Itemized Deductions
10
Internal Revenue Service. How Small Business Owners Can Deduct Their Home Office From Their Taxes