Tax season can be tricky, especially when it comes to understanding all the different tax breaks available. Fortunately, there are plenty of tax breaks you may not know about that can help boost your refund. This article will explore how a 1098 tax break can help lower your taxable income and maximize your tax return. From student loan interest deductions to energy credits, these 1098 tax breaks offer great potential to save money and make filing taxes easier.
1098 Tax Breaks and Basic Info
There are several different types of 1098 forms and they all serve to help individuals and businesses keep track of financial information that isn’t available on main income tax forms.
Here’s a glance at all the 1098 forms:
- 1098 (Mortgage Interest Statement)
- 1098-C (Contributions of Motor Vehicles, Boats, and Airplanes)
- 1098-E (Student Loan Interest Statement)
- 1098-F (Fines, Penalties, and Other Amounts)
- 1098-MA (Mortgage Assistance Payments)
- 1098-Q (Qualifying Longevity Annuity Contract Information)
- 1098-T (Tuition Statement)
If you are looking for more information about how you could get a 1098 tax break and what each form is made for, read on!
1098 (Mortgage Interest Statement)
The true Form 1098 is one of the most common 1098s Americans receive each year. Mortgage companies are required to provide this form if an individual paid at least $600 in mortgage interest in the tax year in question.
To be able to deduct this mortgage interest from your federal taxes, you must be the primary borrower on the loan, and also be active in making payments. If you want to deduct this interest, you will need to itemize your taxes (instead of taking the standard deduction) and use Form 1098 and a Schedule A form to deduct the personal part of mortgage interest.
This form can also be used for reporting mortgage insurance premium payments and mortgage points payments.
1098-C (Contributions of Motor Vehicles, Boats, and Airplanes)
This form is provided to those who have donated a car, boat, or plane worth more than $500 to charity.
Your 1098 tax break for this item will be determined by one of the following (whichever is smaller):
- The gross sales proceeds from the organization’s sale of that vehicle, or
- The vehicle’s fair market value (FMV) on the date you donated. Note: if the FMV is higher than either your cost or some other basis, then you may have to reduce the FMV to figure out the amount you can deduct.
When you donate your vehicle, the organization receiving that vehicle should send you a 1098-C (Copy B) within 30 days of the sale or donation.
1098-E (Student Loan Interest Statement)
Much like the straight 1098, 1098-E is provided to those individuals who paid at least $600 in interest on one or more qualified student loans. This form is provided by lenders and is one of many education tax benefits.
You can potentially take advantage of this 1098 tax break and deduct up to $2,500 from your total taxable income if you also qualify for the student loan interest deduction. This is considered an above-the-line deduction, which means it can be taken without itemizing – you can take this and the standard deduction.
1098-F (Fines, Penalties, and Other Amounts)
Any court-ordered fines, penalties, restitution, or remediation will be reported on Form 1098-F. However, in most cases, these payments are not tax deductible.
1098-MA (Mortgage Assistance Payments)
If you received or paid any homeowner assistance payments through funds from the Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets, you will get that information on Form 1098-MA.
If you meet the requirements (and are itemizing your taxes), you may be able to deduct the amounts for the payments you made.
1098-Q (Qualifying Longevity Annuity Contract Information)
If you received payouts from a qualified longevity annuity contract (a type of retirement account), you will receive a 1098-Q. The qualifying amounts must be included in your income amounts for the year. You can see the limitations and consequences of the premiums on the IRS website.
1098-T (Tuition Statement)
The 1098-T is provided to those who pursued higher education in the past and paid tuition either during that education or after (in the case of student loans where tuition was part of that). This isn’t used to take a deduction, though it can help you qualify for the following credits.
This 1098 tax break can be used to help you claim one of many federal income tax education deductions like the American opportunity tax credit (which is for qualified education expenses paid for by eligible students for the first 4 years of higher education) or the lifetime learning credit (which helped pay for undergraduate, graduate, and professional degree courses with no limit on the number of years you can claim) if you are eligible. It’s important to note that only one of these credits can be used, you can’t use both at the same time.
A True 1098 Tax Break: Letting eFile360 Help You
eFile360 is your resident expert when it comes to filing 1098s, 1099s, W-2s, and ACA forms. The 1098 forms alone can be a confusing bunch, and there are so many ways to inadvertently create errors on those forms, which costs you and your business time and money to remedy.
But with eFile360, you can store and send your information returns however you need – print and mail, e-filing, etc. – and come back to them next year without missing a beat.
For more information about our 1098 filing services, sign up for a free eFile360 account today.