Do You Get a 1098 for a Home Equity Loan?

A home equity loan allows homeowners to borrow against the equity in their home. The proceeds can be used for home improvements, debt consolidation, medical bills, college tuition, and more. Many homeowners take out these loans because the interest paid on home equity debt is usually tax-deductible. But how do you claim that deduction? Do you get a 1098 for a home equity loan like you do for your primary mortgage?

The short answer is yes. Your lender is required to send you a Form 1098 showing the mortgage interest paid each year on your home equity loan or line of credit. This form allows you to deduct the interest on your tax return potentially saving you hundreds or thousands of dollars.

Let’s take a closer look at Form 1098, who is required to file it, what information it includes, and how homeowners can use it to claim the tax deduction for home equity loan interest

What is IRS Form 1098?

Form 1098, also called the Mortgage Interest Statement, is an IRS tax form that your mortgage lender files and sends to you by January 31 each year. It shows how much mortgage interest you paid on your home loans during the previous tax year.

There are a few different versions of Form 1098:

• Form 1098 – For your primary mortgage
• Form 1098-E – For home equity loans or lines of credit
• Form 1098-MA – For mortgage assistance payments

So if you have a first mortgage, home equity loan, and enrolled in a mortgage assistance program, you could potentially receive three separate 1098 forms.

Who Has to File Form 1098?

If you paid mortgage interest exceeding $600 in a tax year, the lender or servicer who received that interest payment must file Form 1098 and send a copy to you. This $600 threshold applies to each loan individually.

For example:

• If you paid $6,000 in mortgage interest on your primary home loan, the lender must file a 1098.
• If you paid $650 in home equity loan interest, the lender must file a separate 1098 for that loan.
• If you paid $500 in interest on a HELOC, no 1098 is required since it’s under the $600 threshold.

The most common lenders required to file Form 1098 are banks, credit unions, mortgage companies, and loan servicers. Individuals who lend money directly to homeowners typically don’t have to file.

The lender should send Form 1098 to the borrower by January 31 for the prior tax year. You’ll receive a separate form for each loan that exceeded $600 in interest paid.

What Information is on Form 1098?

Form 1098 shows key details about your mortgage loan and the interest paid over the tax year:

• Box 1 – Shows total mortgage interest received by the lender during the tax year
• Box 2 – Outstanding mortgage principal as of January 1
• Box 3 – Shows real estate taxes paid from escrow (if applicable)
• Box 4 – Shows refunds or credits for overpaid interest
• Box 5 – Shows mortgage insurance premiums paid
• Box 6 – Shows points paid to refinance or buy down the rate
• Boxes 7-10 – Identifying information such as address, loan number, payer name

The most important number for claiming your tax deduction is the mortgage interest amount listed in Box 1. This is the interest you paid out of pocket during the year.

If you receive Form 1098-E for a home equity loan, it will look nearly identical but with the title “Mortgage Interest Statement for Payer/Borrower” at the top.

How Do I Use Form 1098 to Claim My Tax Deduction?

The main purpose of Form 1098 is to provide documentation so you can claim the mortgage interest paid as an itemized deduction on your tax return.

Here are the basic steps to use your 1098 to deduct home equity loan interest:

1. Collect Form 1098 from each lender. You may receive a separate 1098 for your first mortgage, home equity loan, and HELOC if interest exceeded $600 on each.

2. Add up the mortgage interest amounts listed in Box 1 on all 1098 forms.

3. On your Schedule A (Form 1040), claim this total amount as your deduction for home mortgage interest paid.

4. To qualify for the deduction, the total of all your home loans must be below the limit set by the IRS (typically $750,000).

5. Submit Schedule A along with your Form 1040 tax return to the IRS.

That’s the gist of how to use the 1098 mortgage interest statement to deduct interest paid on a home equity loan. But there are some other nuances:

• You must itemize deductions on your tax return to claim this deduction.

• The interest must have been paid on a loan secured by your primary residence or a second home.

• For loans taken out after 2018, the borrowed money must have been used to buy, build, or substantially improve the home.

• Interest on home equity debt used for other purposes like vacations, vehicles, or medical bills is not deductible.

• There are loan limits on the total amount of mortgage debt you can deduct interest on.

Consult a tax professional if you have questions about what home equity loan interest qualifies for the deduction. They can ensure you deduct the proper amounts and maximize your tax savings.

What if I Don’t Get Form 1098?

It’s possible you might not receive a Form 1098 from your lender, even if you paid over $600 in mortgage interest. This can happen for several reasons:

• The lender missed the filing deadline or simply failed to file.

• You paid interest to an individual lender rather than a business.

• The loan was not secured by your primary residence or second home.

• You paid less than $600 in total interest during the tax year.

If you didn’t get a 1098 for your home equity loan, but still want to claim the deduction, take the following steps:

• Contact the lender – Request they provide a 1098 form documenting the interest paid.

• Review loan records – Add up interest payments using loan statements, payment records, or canceled checks.

• Provide your own statement – Fill out and file Form 1098 yourself documenting total interest paid. Submit to IRS.

• Explain on your tax return – Note the missing 1098 form and provide interest total on Schedule A.

While lenders are required to file 1098s, you are ultimately responsible for documenting deductions on your tax return. So if your lender fails to send Form 1098, take steps to prove the amount you paid in mortgage interest over the year.

The Bottom Line

Form 1098 plays an important role in documenting the mortgage interest paid on your primary mortgage, home equity loans, and HELOCs. With this form, you can prove how much interest you paid and take a tax deduction for it if you qualify. So yes, your lender is required to send you a 1098 for your home equity loan, just like for your first mortgage. Be sure to review it for accuracy and use it when filing your taxes to maximize deductions and savings.