In an effort to make tax filing easier this year, we’re breaking down the various IRS tax forms to help you know if you need them and how to use them.
There are several versions of Form 1098: 1098, 1098-C, 1098-E, and 1098-T.
The original Form 1098 is used to report mortgage interest to the federal government, as well as to the person who paid the interest. Then that person can deduct the interest they paid on Schedule A.
To deduct this interest, you must itemise your deductions. So if your mortgage interest is less than your standard deduction, you may not want to itemise unless you have other deductions that, including your mortgage interest, exceed the standard deduction for your deposit status for. the effects of the declaration. You can also deduct the points paid when you get a new mortgage, whether buying a home or refinancing, and these points are also shown on this form.
The amounts you paid for home insurance are shown here if you are paying them through your escrow account with your mortgage agent. If you pay your home insurance directly, it will not appear on the list and you will need to track the amounts you paid.
If you donate a vehicle to a charity (this also includes boats and airplanes), you will receive a 1098-C from the charity. These vehicles are often delivered to people in need or sold to them at prices below market prices. This form confirms that you did not participate in this transaction. However, if the value of the car is less than $ 500, you may not receive one of these forms. Read the instructions on Form 1098-C for more information.
Paying for college is expensive, but luckily you can get tax relief on the interest you pay for what may seem like the rest of your life. Each year, from each of your student loan officers, you will receive a 1098-E detailing the amount of interest you paid that year. This interest is directly deductible from your income on your 1040 (no details required) as long as you meet the income condition.
There is no limit on how much or how little interest you can deduct, as long as all loans were used to pay for qualifying expenses while you were in school. However, the deduction is phased out if your modified adjusted gross income (MAGI) is between $ 65,000 and $ 80,000 (between $ 130,000 and $ 160,000 if you are filing a joint return). You cannot claim an interest deduction on a student loan if your MAGI is $ 75,000 or more ($ 155,000 or more if you are filing a joint return). For details on how to calculate your MAGI, see Chapter 4 of publication 970. If you haven’t paid a lot of interest during the year, the server may not send you a 1098-E. , but you can still deduct that interest as long as you have a record of how much you paid. If you don’t know, call the administrator to request and record it in your tax file.
Keep in mind that if your parents are paying student loans on your behalf (or for someone else), the money is considered a gift and you can still deduct the interest from your own taxes. However, if the loan is in the name of another person, that person is entitled to benefit from the interest deduction as long as they pay.
If you or any of your dependants are currently in school, the school will send you a 1098-T at the end of the year detailing all fees paid to you for tuition and other expenses. educational requirements. Use this form to calculate education-related tax credits and deductions, such as the tuition deduction, lifelong learning credit, or US opportunity credit.
The amounts on the form include all the money you paid to the school, even if you paid in advance; the payment appears on the tax form for the year in which it was actually paid. For example, if you pay the spring semester tuition in the winter, it will appear on the 1098-T of the previous year. These amounts include money used from loans to pay for tuition and list scholarships and college grants separately.
Note that some expenses, such as textbooks and other supplies, are generally not reported on the 1098-T, but can still be used to claim tax credits or education deductions. However, the expenses must be considered eligible expenses by the IRS in order to deduct them.