After the deductions claimed for income taxes paid, and real estate, your irs mortgage interest is the next largest deduction against federal income taxes that you can make. For most people, their home is the largest asset they own, so to not claim their mortgage interest would result in them incurring a larger tax liability, or if they are expecting a tax refund when filing annual taxes, they will get a smaller refund.

In preparation for your income tax filing preparation, you should get together all 1098 forms that relate to your home mortgages, and any equity loans you may have received. Every lender by law, must provide the 1098 form to you no later than January 31 each year. Should you not receive the form by the end of the first week in February, you should contact the lender to ensure that it will be sent to you in time for you to submit your filed taxes no later than your April 15 deadline.

If you have more than one 1098 form, you will need to total all amounts in box 1 on all forms before entering on your tax form, since this will be you total interest paid in the tax year. No principal payment amount is included in the tax form.

The amounts in Box 2 on the 1098 forms should also be totaled. These represent the total of all points paid in the year. You will next calculate totals from the two boxes just mentioned and enter them in line 10 of schedule A, the itemized schedule of deductions.

Next you will figure all other deductions in Schedule A and place the total on line 29 of the Schedule A at line 40a of the Form 1040. Your mortgage interest will be a part of the total itemized deduction calculated.

It is important to note that tax forms change periodically, so always make sure you have the most current forms by checking the official IRS website.