The 1098 Form: Your Receipt for Owning a Home

If you’re a homeowner (or hoping to become one soon), this post is for you. We’re breaking down how your home and your tax return work together: no complicated jargon, no judgment, just real talk.

Let’s kick things off with something that lands in your mailbox every January and often gets tossed aside: Form 1098.

So, What Exactly Is Form 1098?

Think of Form 1098 as your receipt from the bank for all the mortgage interest you paid throughout the year.

When you make your monthly mortgage payment, part of that money goes toward paying down your loan (the principal), and part of it goes toward interest. That interest portion? The IRS wants to know about it. And your lender is required to tell them: and you: exactly how much you paid.

That’s where Form 1098 comes in.

Your mortgage company sends you this form by January 31st each year, summarizing everything you need to potentially claim a tax deduction. If you paid $600 or more in mortgage interest during the year, you’ll get one. If you have multiple mortgages, expect a separate form for each.

Pretty straightforward, right?

What’s Actually on the Form?

Form 1098 isn’t complicated. Here’s what you’ll see in those little boxes:

Box 1: Mortgage Interest Received
This is the big one. It shows the total amount of interest you paid on your mortgage for the year. This is the number that matters most when it comes to your potential tax deduction.

Box 5: Mortgage Insurance Premiums
If you put down less than 20% when you bought your home, you’re probably paying private mortgage insurance (PMI). That amount shows up here. Depending on current tax law, this might also be deductible.

Box 6: Points Paid on Purchase of Principal Residence
Did you pay “points” when you closed on your home to get a lower interest rate? Those could be deductible too, and they’ll show up in this box.

That’s really it. Three key numbers that could save you money at tax time.

The Mortgage Interest Deduction: Why It Matters

Here’s where it gets good.

The IRS allows you to deduct the interest you pay on your mortgage from your taxable income. This is called the mortgage interest deduction, and it’s one of the biggest tax perks of homeownership.

Let’s say you paid $12,000 in mortgage interest last year (Box 1 on your 1098). If you itemize your deductions instead of taking the standard deduction, that $12,000 comes right off your taxable income. Depending on your tax bracket, that could mean hundreds or even thousands of dollars back in your pocket.

But here’s the catch: you have to itemize to claim it.

For a lot of folks: especially those with smaller mortgages or who live in areas with lower property taxes: the standard deduction might actually be higher than their itemized deductions. In that case, you’d take the standard deduction and skip the 1098 altogether.

Not sure which route is better for you? That’s exactly the kind of thing we help with at Small Business Tax Solutions.

The $750,000 Limit (And What It Means for You)

There’s a cap on how much mortgage debt qualifies for the interest deduction.

If your mortgage was taken out after December 15, 2017, you can only deduct interest on the first $750,000 of your loan (or $375,000 if you’re married filing separately).

For most homeowners, this isn’t a problem. But if you’re buying in a high-cost area or purchasing investment property, it’s something to keep in mind.

Loans taken out before that date? The old limit of $1 million still applies.

Either way, your 1098 just reports what you paid: it’s up to you (or your tax pro) to apply the rules correctly.

Why Self-Employed Folks Should Pay Extra Attention

If you’re a 1099 contractor, sole proprietor, or running a single-member LLC, your 1098 deserves a closer look.

Here’s why: when you’re self-employed, every deduction counts. You’re already juggling sole proprietor tax deductions, quarterly estimated payments, and trying to keep your books clean. Adding the mortgage interest deduction to your strategy can make a real difference in your overall tax picture.

Plus, if you use part of your home exclusively for business (hello, home office!), there may be even more deductions on the table. Your 1098 is just one piece of the puzzle, but it’s an important one.

And here’s a pro tip: if you’re thinking about buying a home as a self-employed person, start preparing your taxes now. Lenders want to see clean, consistent income. The way you file your taxes directly impacts what kind of mortgage you can qualify for.

That’s where having someone who understands both real estate AND taxes becomes a game-changer.

What to Do When Your 1098 Arrives

When that form hits your mailbox (or your email), here’s your game plan:

1. Don’t toss it. Even if you’re not sure you’ll itemize, keep it with your tax documents.
2. Double-check the numbers. Make sure the interest amount looks right based on your monthly statements. Mistakes happen.
3. Store it safely. The IRS recommends keeping tax records for at least three years. If you ever get audited, you’ll want this form handy.
4. Talk to your tax pro. Not sure whether to itemize or take the standard deduction? We can run the numbers for you.

Real Estate + Taxes: Two Worlds, One Strategy

Here’s something I don’t share enough: I’m not just a tax professional: I’m also a licensed Realtor.

That means I see both sides of the homeownership journey. I help people find homes, and then I help them understand how that home impacts their taxes. It’s a perspective most people don’t get from their accountant OR their real estate agent.

Whether you’re buying your first place, selling and wondering about capital gains, or trying to figure out how your mortgage fits into your overall financial picture, I’ve got you covered on both fronts.

Want to learn more? Check out my real estate content on YouTube at @hamptonroadsrealestate or visit sonalihutson.com for resources on buying and selling in the Hampton Roads area.

Let’s Talk

Got questions about your 1098? Not sure if itemizing makes sense for you this year? Need help with 1099 contractor taxes or business tax services?

Text me directly at 757.837.0096 for real estate or tax advice. No judgment, no pressure: just real answers from someone who actually gets it.

And if you’re ready to get your taxes handled the right way, book a consultation with Small Business Tax Solutions. We specialize in helping sole proprietors, gig workers, and small business owners keep more of what they earn.

Until then, keep that 1098 safe. It’s more valuable than it looks. 🏡