A 1098 mortgage interest deduction can increase your refund, but only if you itemize deductions instead of taking the standard deduction

The Form 1098 reports the mortgage interest you paid during the year. If you itemize deductions on your tax return, that interest reduces your taxable income, which can lower the taxes you owe and increase your refund. However, most people take the standard deduction, which means the 1098 does not change their refund at all — the IRS already accounts for a flat deduction amount without needing to know your actual mortgage interest.

Whether the 1098 helps you depends on whether your total itemized deductions (mortgage interest, property taxes, charitable donations, and other allowed expenses) exceed the standard deduction for your filing status. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married filing jointly. If your itemized deductions are higher, you benefit from reporting the 1098 interest. If they are lower, itemizing costs you money compared to taking the standard deduction.

Your lender sends the 1098 to you and to the IRS by January 31 each year. You receive it only if you paid at least $600 in mortgage interest during that tax year. The form shows the interest paid, property taxes paid (if the lender collected them), and points paid on a refinance.

Key Takeaways

  • The 1098 increases your refund only if you itemize deductions and your total itemized deductions exceed the standard deduction for your filing status.
  • Most taxpayers benefit more from the standard deduction than from itemizing, so the 1098 does not change their refund.
  • You receive a 1098 only if you paid at least $600 in mortgage interest during the tax year.
  • The lender sends the 1098 to both you and the IRS by January 31, so the IRS already knows the amount you reported.

When itemizing with a 1098 actually saves you money

Itemizing makes sense when your mortgage interest, property taxes, state and local taxes (capped at $10,000), charitable donations, and medical expenses add up to more than the standard deduction. For example, if you are married filing jointly with $18,000 in mortgage interest and $8,000 in property taxes, your itemized deductions total $26,000 — less than the $29,200 standard deduction, so you would not benefit. But if you also donated $5,000 to charity, your total becomes $31,000, which exceeds the standard deduction by $1,800. That $1,800 difference reduces your taxable income and lowers your tax bill.

The benefit varies by income level and tax bracket. A taxpayer in the 22% tax bracket saves $396 in taxes on that $1,800 difference. Someone in the 12% bracket saves $216. The higher your tax bracket, the more each dollar of deduction is worth.

High-income earners and people in states with high property taxes are most likely to itemize. People who own their home outright (no mortgage interest) or who have paid off most of their mortgage (very little interest remaining) often find the standard deduction simpler and better.

How to know if your 1098 will change your refund

Add up all your potential itemized deductions: mortgage interest from the 1098, property taxes paid, state and local income taxes (up to $10,000 total), charitable donations, and unreimbursed medical expenses over 7.5% of your adjusted gross income. Compare that total to the standard deduction for your filing status.

If your itemized total is higher, you benefit from itemizing and reporting the 1098 interest. If the standard deduction is higher, itemizing costs you money, and you should take the standard deduction instead — the 1098 will not appear on your return at all.

Tax software like TurboTax, H&R Block, and TaxAct will calculate both scenarios and show you which one results in a lower tax bill. The IRS Free File program also offers free software to lower-income filers. Many people find it worth running both calculations before filing, since the difference can be hundreds of dollars.

What happens if the 1098 amount does not match what you paid

Lenders sometimes report incorrect amounts on the 1098. Common errors include interest from an escrow shortage, interest paid to a previous lender before a refinance, or penalties the lender mistakenly included. If the 1098 does not match your mortgage statement or your own records, contact the lender and ask for a corrected form.

If the lender confirms the error and sends you a corrected 1098, file your return using the corrected amount. If you already filed and the IRS received the incorrect 1098, you may need to file an amended return (Form 1040-X) once you have the corrected form. The IRS will match your return against the 1098 they received, so reporting a different amount without a corrected 1098 on file can trigger a notice.

Do not ignore a discrepancy. The IRS computers automatically compare what you report to what the lender reported, and a mismatch can delay your refund or result in a bill for the difference.

Refinancing and the 1098 in the year of the refi

When you refinance a mortgage, you may pay points (prepaid interest) to lower your interest rate. The 1098 from your new lender will show these points separately. You can deduct points paid on a purchase in the year you buy, but points on a refinance must be deducted over the life of the new loan — typically 15 or 30 years — unless you pay off the loan early.

In the year you refinance, you will receive two 1098 forms: one from your old lender (showing interest paid before the refinance) and one from your new lender (showing interest paid after the refinance, plus any points). Both amounts go into your itemized deduction calculation if you itemize.

The 1098 and your refund timeline

The 1098 does not speed up or slow down your refund. The lender sends it by January 31, and you include it in your return when you file. If you file early (in January or early February), you may not have received the 1098 yet — in that case, you can file using an estimate of your mortgage interest from your December statement and amend your return once the 1098 arrives. Most people wait until late February or March to file, by which time the 1098 is in hand.

The IRS processes your return based on the information you report, not on whether you have the 1098 in your hands. If you report mortgage interest on your return and the IRS later receives a 1098 from your lender showing a different amount, the IRS will compare the two and may send you a notice if they do not match.

Frequently Asked Questions

Will the 1098 automatically increase my refund?

No. The 1098 increases your refund only if you itemize deductions and your total itemized deductions exceed the standard deduction. Most taxpayers benefit more from the standard deduction, so the 1098 does not change their refund. Tax software will show you which option results in a larger refund.

What if I did not receive a 1098 but I paid mortgage interest?

Contact your lender. You should receive a 1098 if you paid at least $600 in interest during the year. If the lender says you paid less than $600, you cannot deduct the interest (the standard deduction already accounts for basic tax relief). If the lender confirms you paid more than $600 but did not send a form, ask for one or a written statement of the amount paid.

Can I deduct mortgage interest if I take the standard deduction?

No. The standard deduction is a flat amount that already includes an assumed deduction for various expenses, including some tax relief for homeowners. If you take the standard deduction, you do not report the 1098 interest separately. You can only deduct mortgage interest if you itemize.

Does the 1098 affect my refund if I paid off my mortgage early?

Only if you itemize deductions. The 1098 will show the interest you paid up to the payoff date. If your total itemized deductions exceed the standard deduction, that interest reduces your taxable income and may increase your refund. If the standard deduction is higher, the 1098 does not help.

What if my 1098 shows interest I did not actually pay?

Contact your lender immediately. Errors happen — escrow shortages, interest from a previous loan, or data entry mistakes. Ask the lender to investigate and send a corrected 1098 if needed. Do not file your return with an amount you know is wrong; the IRS will match your return against the 1098 the lender sent them, and a mismatch can delay your refund.