How to Report Interest on a Home Loan
For homeowners, the Internal Revenue Service mitigates the cost of paying the mortgage by allowing a tax deduction for the interest paid on the home. This deduction requires you to itemize, which forces you to forgo the standard deduction. However, for many mortgage borrowers, the interest paid on the mortgage will be greater than the standard deduction, especially when itemizing. To claim the deduction, you need Form 1098 that you lender sends you at the end of the year to report the amount of interest paid.
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Instructions
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Contact your bank if you have not received a Form 1098 by February of the following year. Your bank must provide you with a Form 1098 so you can document your paid interest.
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Use Form 1040 to file your income taxes. Using any other form does not allow you to claim home loan interest because you cannot itemize your deductions with any other form.
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Opt to claim your itemized deductions instead of the standard deduction by filing Schedule A. If you do not file Schedule A, you cannot claim your home loan interest.
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Report your home loan interest on Line 10 of your Schedule A. This amount, plus your other itemized deductions, will be copied to line 40 of your Form 1040 tax return and subtracted from your taxable income.
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Tips & Warnings
The mortgage interest deduction is limited to the interest on the first $1 million of home loan debt; $500,000 if you're married and filing separately. If your mortgage exceeds these limits, you must calculate the amount of interest charged on the maximum mortgage amount to figure your deduction.
