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What to do with Form 1098 (mortgage interest statement) on a rental property

DoorKeeping team

4 min read

Form 1098 is the statement your lender sends showing the mortgage interest you paid in the year. For a rental, the interest on it goes on Schedule E, line 12. Compare Box 1 to the interest in your own books before you send it to your tax preparer, because small differences are common and big ones mean something is missing.

What Form 1098 is and when it arrives

A lender that receives $600 or more of mortgage interest in a year from a borrower must report it to the IRS and give the borrower a copy. That is the Form 1098. The IRS instructions for Form 1098 set the rules for lenders, including that the copy to the borrower is due by January 31.

The form lists the interest received in Box 1 and also carries other items, such as the outstanding principal and any mortgage insurance premiums, in other boxes. The box numbers and labels change from year to year, so read the labels on your own form instead of relying on memory.

Most lenders post it in your online account in late January. If you cannot find it, look under tax documents, or ask the lender to resend it. It is also usually available as a PDF.

Where the interest goes on your return

For rental property, the interest does not go on Schedule A. It is a rental expense on Schedule E. The Schedule E instructions say mortgage interest reported to you on Form 1098 goes on line 12. Interest paid to anyone who did not send you a Form 1098, such as a seller who financed the sale, goes on line 13.

  • One property, one loan: the Box 1 amount is the starting point for line 12.
  • Two rentals, two loans: each loan has its own form. Put each interest amount with the right property.
  • A loan on a property that is part rental, part personal use: only the rental share belongs on Schedule E. Your preparer decides how to split it.

IRS Publication 527 covers what is deductible as rental interest and how loan costs such as points are handled differently from regular interest. Points on a rental loan are generally spread over the life of the loan, so they are not simply added to Box 1.

How to check it against your books

Add the twelve interest portions you recorded from your lender's monthly statements. Compare the total to Box 1. The two should be close.

Example a made-up rental's books show interest of $9,960 for the year. Form 1098 shows $9,972. The $12 difference is because the lender counts interest in the year it received the payment, while the books followed the interest dated on each statement. The difference is small and explained. A difference of $1,200 would not be.

Common reasons for a real gap:

  • A payment was booked as one expense, with no split between interest and principal. See how to record a mortgage payment.
  • The loan was refinanced during the year, so there are two forms, or a payoff interest amount is missing.
  • Interest was paid by the lender's escrow or by someone else on your behalf.
  • The form includes interest on a different property or a personal loan with the same lender.

If something is wrong or missing

  • No form: you can still deduct the interest you actually paid. Use your lender statements and year-end summary. Ask your preparer how to report it.
  • Wrong name or owner: the form may be in your personal name while an LLC owns the property, or the reverse. Tell your preparer. Who may deduct the interest depends on who is legally responsible for the loan and who paid it.
  • Wrong amount: ask the lender for a corrected form. Do not change the number yourself.

Keep the form with the loan statements. The year-end package your preparer needs is listed in what to send your CPA at tax time.

How DoorKeeping handles it

In DoorKeeping the monthly mortgage payment arrives through the bank feed. Ask Claude or ChatGPT to read the lender's statement and list the principal, interest and escrow, and keep that list with the property's records. A bank line that looks like loan principal is never filed as an expense for you. At year end, ask for the property's mortgage interest total and compare it to Form 1098. The Schedule E report is built from the same books, one per property. DoorKeeping gives no tax advice, so confirm any gap with your preparer.

Sources

  1. IRS, Instructions for Form 1098, read Oct 30, 2026
  2. IRS, Instructions for Schedule E (Form 1040), read Oct 30, 2026
  3. IRS, Publication 527, Residential Rental Property, read Oct 30, 2026

Questions

Do I need Form 1098 to deduct rental mortgage interest?
No. You can deduct interest you actually paid. The form is the lender's report of it and the easiest proof. Ask your preparer if you are missing one.
Which line of Schedule E is mortgage interest?
Line 12 for interest reported on Form 1098. Line 13 is for other mortgage interest, such as paid to a seller.
Why is Form 1098 different from my books?
Often a timing difference, since the lender reports interest by when it received payments. Large gaps usually mean a payment was not split or a loan was missed.
When do lenders send Form 1098?
The IRS instructions set January 31 as the due date for the borrower's copy.

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