Three different Form 1098 variants report three different deductible expenses. Form 1098 reports mortgage interest of $600 or more. Form 1098-T reports qualified tuition for education credits. Form 1098-E reports student loan interest of $600 or more. OBBBA made the $750,000 mortgage debt cap permanent, restored the PMI deduction starting in tax year 2026, and raised the SALT cap to $40,000. Each form drives a specific deduction or credit on Schedule A or Form 1040.
$750,000 mortgage interest cap is now permanent. OBBBA §70108 amended IRC §163(h)(3)(F) to lock in the TCJA limit. Loans before December 16, 2017 remain grandfathered at $1,000,000.
PMI deduction restored permanently, starting tax year 2026. Mortgage insurance premiums on acquisition debt are now treated as qualified residence interest, subject to AGI phase-out ($100K-$110K single/MFJ; $50K-$54,500 MFS).
SALT cap raised to $40,000 for 2025-2029 ($20,000 MFS), with 1% annual inflation adjustments and phase-out beginning at $500,000 MAGI ($250,000 MFS).
Lenders must file Form 1098 to report mortgage interest of $600 or more received from an individual in the course of a trade or business under IRC §6050H. The $600 threshold applies separately to each mortgage. If a borrower paid $400 on one mortgage and $300 on another to the same lender, no Form 1098 is required for either.
| Box | What It Reports | Where It Goes on Return |
|---|---|---|
| Box 1 | Mortgage interest received | Schedule A, line 8a (itemized only) |
| Box 2 | Outstanding mortgage principal (Jan 1) | Informational; used for debt limit math |
| Box 3 | Mortgage origination date | Determines $750K vs $1M grandfathered cap |
| Box 4 | Refund of overpaid interest from prior year | Schedule 1, "Other income" if previously deducted |
| Box 5 | Mortgage insurance premiums (PMI/MIP) | Schedule A as qualified interest (2026+, OBBBA) |
| Box 6 | Points paid on purchase of principal residence | Schedule A; deductible in year paid if conditions met |
| Box 10 | Real estate taxes paid from escrow | Schedule A, line 5b (subject to SALT cap) |
| Box 11 | Mortgage acquisition date | Used when servicing transferred mid-year |
The deduction applies to acquisition debt - loans used to buy, build, or substantially improve a primary residence or one secondary residence. The combined acquisition debt across both homes determines the limit.
| Loan Origination Date | Debt Limit | MFS Limit | Authority |
|---|---|---|---|
| On or before Oct 13, 1987 (grandfathered) | No limit | No limit | IRC §163(h)(3)(D) pre-1987 acquisition |
| Oct 14, 1987 - Dec 15, 2017 | $1,000,000 | $500,000 | IRC §163(h)(3)(B) pre-TCJA |
| After Dec 15, 2017 (post-TCJA) | $750,000 | $375,000 | IRC §163(h)(3)(F) as made permanent by OBBBA §70108 |
OBBBA amended IRC §163(h)(3)(F) to treat mortgage insurance premiums as deductible qualified residence interest for amounts paid or accrued in tax years beginning after December 31, 2025. The premium covers acquisition debt, the insurance contract must be issued after 2006, and the deduction phases out based on AGI.
| Filing Status | Phase-Out Begins | Fully Phased Out |
|---|---|---|
| Single, MFJ, HoH, QW | $100,000 AGI | $110,000 AGI |
| Married Filing Separately | $50,000 AGI | $54,500 AGI |
The phase-out reduces the otherwise allowable deduction by 10% for each $1,000 ($500 MFS) of AGI above the threshold. PMI ranges from approximately 0.5% to 1.5% of the loan amount annually, so a homeowner with a $400,000 mortgage might pay $2,000 to $6,000 in PMI. At a 22% marginal rate, the deduction value is $440 to $1,320 - meaningful but only available to itemizers below the income thresholds.
Interest on home equity loans and HELOCs is deductible only if the proceeds were used to buy, build, or substantially improve the home securing the loan. This was originally a TCJA change and has been continued by OBBBA. A HELOC used for kitchen remodel: deductible. The same HELOC used for debt consolidation, tuition, or a vehicle purchase: not deductible. The use of proceeds, not the loan product, determines deductibility. Documentation matters under audit - keep contracts, invoices, and bank statements.
Points paid on the purchase of a principal residence are generally fully deductible in the year paid if they meet the requirements in IRC §461(g)(2): calculated as a percentage of the loan, customary practice in the geographic area, paid in connection with the purchase, and not paid from borrowed funds. Points on a refinance are typically amortized over the loan term. When a refinanced loan is later refinanced or paid off, unamortized points become fully deductible.
Eligible educational institutions file Form 1098-T under IRC §6050S to report qualified tuition and related expenses paid during the year. The form drives two non-refundable credits and one refundable credit under IRC §25A: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC).
| Box | What It Reports |
|---|---|
| Box 1 | Payments received for qualified tuition and related expenses |
| Box 4 | Adjustments to prior year qualified tuition |
| Box 5 | Scholarships or grants administered by the institution |
| Box 6 | Adjustments to prior year scholarships |
| Box 7 | Checkbox if Box 1 includes amounts for next year's term |
| Box 8 | Checkbox if student is at least half-time |
| Box 9 | Checkbox if student is enrolled in a graduate program (LLC eligible but not AOTC) |
| Item | 2026 Amount |
|---|---|
| Maximum credit per student | $2,500 (100% of first $2,000 + 25% of next $2,000) |
| Refundable portion | Up to 40% ($1,000) |
| Phase-out begins (single) | $80,000 MAGI |
| Phase-out complete (single) | $90,000 MAGI |
| Phase-out begins (MFJ) | $160,000 MAGI |
| Phase-out complete (MFJ) | $180,000 MAGI |
| Years available per student | First 4 years of post-secondary education only |
AOTC requires the student to be pursuing a degree or credential, enrolled at least half-time for at least one academic period, not have completed the first four years of post-secondary education, and not have a felony drug conviction. MFS taxpayers are not eligible. The credit is computed per student, so a family with multiple eligible students can claim AOTC for each.
| Item | 2026 Amount |
|---|---|
| Maximum credit per return | $2,000 (20% of first $10,000) |
| Refundability | Non-refundable |
| Phase-out begins (single) | $80,000 MAGI |
| Phase-out complete (single) | $90,000 MAGI |
| Phase-out begins (MFJ) | $160,000 MAGI |
| Phase-out complete (MFJ) | $180,000 MAGI |
| Years available | Unlimited (no year cap) |
LLC is per return, not per student. A taxpayer with two qualifying students gets a single $2,000 maximum. LLC has broader eligibility than AOTC - the student does not need to be pursuing a degree, can be enrolled less than half-time, and can be in graduate school. This makes LLC the appropriate credit for graduate students, professional courses, and skill development.
Lenders file Form 1098-E under IRC §6050S to report student loan interest of $600 or more received during the year. Interest below $600 is still deductible but no form is required. The borrower claims the deduction as an adjustment to income on Schedule 1 (above-the-line), so the deduction is available without itemizing.
| Item | 2026 Amount | Authority |
|---|---|---|
| Maximum deduction | $2,500 | IRC §221(b)(1) |
| Phase-out begins (single, HoH) | $85,000 MAGI | IRC §221(b)(2) |
| Phase-out complete (single, HoH) | $100,000 MAGI | IRC §221(b)(2) |
| Phase-out begins (MFJ) | $170,000 MAGI | IRC §221(b)(2) |
| Phase-out complete (MFJ) | $200,000 MAGI | IRC §221(b)(2) |
| MFS eligibility | Not allowed | IRC §221(e)(2) |
The loan must have been incurred solely to pay qualified higher education expenses for the taxpayer, spouse, or dependent. Mixed-use loans (partly education, partly other) are not deductible. The taxpayer must be legally obligated on the loan - a parent who pays interest on a child's loan where only the child is legally obligated cannot claim the deduction. A taxpayer claimed as a dependent on someone else's return cannot claim the deduction even if they paid the interest.
Under the American Rescue Plan Act of 2021, discharges of student loan debt are excluded from gross income under IRC §108(f)(5) through tax year 2025. OBBBA did not extend this exclusion. Beginning in 2026, certain student loan forgiveness may again become taxable absent further congressional action. Watch for guidance on income-driven repayment plan forgiveness specifically.
| Form | Borrower Copy Due | IRS Paper Filing | IRS Electronic Filing |
|---|---|---|---|
| 1098 | January 31 | February 28 (March 1 for 2026) | March 31 |
| 1098-T | January 31 | February 28 (March 1 for 2026) | March 31 |
| 1098-E | January 31 | February 28 (March 1 for 2026) | March 31 |
The 10-form e-filing threshold under T.D. 9972 (effective filings made in 2024 and later) means most filers must e-file. The threshold counts all information returns in the aggregate, not by form type. A small lender filing 5 Forms 1098 and 6 Forms 1099-INT must e-file all 11.
| Lateness | Per-Form Penalty (2026 Filings) | Authority |
|---|---|---|
| Filed within 30 days of due date | $60 | IRC §6721(a)(1) / §6721(b)(1) |
| Filed by August 1 | $130 | IRC §6721(b)(2) |
| Filed after August 1 or not filed | $340 | IRC §6721(a)(1) |
| Intentional disregard | $680 (no maximum) | IRC §6721(e) |
A matching penalty under IRC §6722 applies separately for failure to furnish the borrower copy. The same act of not filing can therefore trigger $60-$340 under §6721 plus $60-$340 under §6722 per form.
Form 1098 reports to the "payer of record" - typically the principal borrower on the lender's books. If a co-borrower actually paid the interest from their own funds, the lender's Form 1098 will not show that borrower's TIN. The co-borrower may deduct interest they paid, but must keep proof of payment (cancelled checks, bank statements). The "wrong name on 1098" mismatch is one of the most common audit triggers for the mortgage interest deduction.
When a mortgage is sold or servicing is transferred mid-year, the borrower receives a Form 1098 from each servicer. Add the Box 1 amounts. If a mortgage was refinanced into a new loan, the new loan's debt limit follows the original loan's date for grandfathering purposes only if proceeds are not increased. Cash-out refinances reset the loan to the post-2017 $750,000 cap.
Box 1 reports amounts the institution received, which may not match what the family actually paid out of pocket. Scholarships in Box 5 may be applied to non-qualified expenses (room and board) rather than tuition. Reconcile against student account statements before computing the credit. The amount used to compute AOTC or LLC is qualified tuition and related expenses actually paid by the taxpayer, not the institutional reporting figure.
If a parent makes the payment on a loan where the child is the only legal obligor, the IRS treats this as a gift to the child followed by a payment by the child. The child (if not claimed as a dependent) can claim the deduction. The parent cannot. This matters for the year the child first becomes independent - that is often when student loan interest first becomes deductible.
Primary authority: IRC §163(h) (qualified residence interest), §25A (education credits), §221 (student loan interest deduction), §6050H (Form 1098 reporting), §6050S (Forms 1098-T and 1098-E reporting), §6721 / §6722 (information return penalties), §108(f) (student loan discharge). One Big Beautiful Bill Act, P.L. 119-21, §70108 (mortgage interest permanence and PMI restoration). IRS Form 1098 Instructions (Rev. December 2026), IRS Form 1098-T Instructions, IRS Form 1098-E Instructions, IRS Publication 936 (Home Mortgage Interest Deduction), IRS Publication 970 (Tax Benefits for Education), Rev. Proc. 2025-32 (2026 inflation adjustments).