MORTGAGE INTEREST

Mortgage interest part explains what you can deduct as home mortgage interest. It includes
how to report deductible interest on your tax return

HOME MORTGAGE INTEREST:

It is a Interest on loans secured by principal residence and one other residence termed as se
Limitation on deductible interest applies for home acquisition loans exceeding $1 million; (Mo
to buy, build, or improve your home are called home acquisition debt)
Limitation on deductible interest applies for home equity loans exceeding $100,000; (Mortga
other than to buy, build, or improve your home)
Interest reported on Form 1098 flows to line 10 of Sch A & interest paid to individuals flows t
Deduction subject to phase out rules;

POINTS :
Are certain charges paid by a borrower to obtain a home mortgage;
Termed as loan origination fees, loan discount, maximum loan charges or discount points;
Points paid on loan to purchase a home is fully deductible in the year of payment;
Points paid on refinance of loan are deductible over the life of the loan;
Points reported on 1098 flow to line 10 of Sch A & points not reported on 1098 flow to line 12
Subject to phase out rules;

Form 1098

Box 1 : Mortgage interest received from payer(s) \ borrower(s)

Box 2: Points paid on purchase of principal residence
Box 3 : Refund of Overpaid interest
Box 4 : shows mortgage insurance premiums paid.
Box 5 : It shows real estate taxes, or insurance paid from escrow
rtgage interest. It includes discussion on points and on

her residence termed as second home;

s exceeding $1 million; (Mortgages you took out after October 13, 1987,

ceeding $100,000; (Mortgages you took out after October 13, 1987,

t paid to individuals flows to line 11 of Sch A;

arges or discount points;

ear of payment;

ted on 1098 flow to line 12 of Sch A;

Types Of Source Document For 1098-Mortgage Interest
1 Organizer Page
2 1098-Mortgage Interest
3 Handwritten Information
4 Typed Information/Printed Income Summary
5 Settlement Statement
1 Organizer Page
2 - 1098 - Mortgage Interest
Input Screens in Tax Software
1 A-3
2 M-8 - If Paid for Home - as Business use of home
3 E-1 - If paid for Rental House

In pro system:
We have to input mortgage interest paid in input form A-3 line 30 or 54 and deductible points
Refund of overpaid interest is considered it as other income and it is to considered in input fo
Box no.Description
1 Mortgage interest received from payer(s)/borrower(s)
2 Points paid on purchase of principal residence
3 Refund of overpaid interest
4 Mortgage insurance premiums
ness use of home

d in input form A-3 line 30 or 54 and deductible points to be entered on line 35.
ed it as other income and it is to considered in input form M-1.
Input Screen & Box Output
Form A-3, line 30 or 54 Schedule A, line 10
Form A-3, line 35 Schedule A, line 10
Less overpaid interest from Form A-3, line
Overpaid
30 or 54
interest will less from Schedule A, line 10
m Schedule A, line 10