Tax documents for property: Form 1098 and Schedule E

What Form 1098 reports

The lender files Form 1098 for a mortgage when it receives $600 or more of mortgage interest from an individual in the course of its business. Box 1 is the interest received during the calendar year, and the form's instructions say it does not include points.

Box 6 reports points only when they were paid on the purchase of the borrower's principal residence. Points on a refinance are not reportable in Box 6, and neither are a rental loan's points, so the client has to find them on the closing statement.

Box 5 reports mortgage insurance premiums of $600 or more. Box 10 is optional, and the instructions give real estate taxes and escrowed insurance as examples, so a blank Box 10 does not mean no property tax was paid. Box 11 shows the acquisition date if the loan changed hands during the year. In that case, check whether both servicers sent a statement before adding the two together.

Dates for the 2026 Form 1098 and the IRS filing

The General Instructions for Certain Information Returns set January 31 as the recipient date for Form 1098. When the date falls on a Saturday, Sunday or legal holiday, the rule is to furnish by the next business day. For 2026 payments, January 31, 2027 is a Sunday, so the recipient copy is due Monday, February 1, 2027.

The IRS filing dates in the same instructions are February 28 for paper and March 31 for electronic filing. February 28, 2027 is a Sunday, so a paper Form 1098 for 2026 would be due Monday, March 1, 2027. The 2026 instructions were not among the sources checked for this guide, so confirm the dates there before putting them on a calendar.

If the statement has not arrived by early February 2027, ask the servicer in writing for the 2026 interest total and points paid. The client can write: 'Please send the 2026 Form 1098 for the loan ending in the last four digits, or the total interest and points paid in 2026 with the year-end statement'.

Points: when the client deducts them

For a main home purchase, points can be deducted in full in the year paid only if every test in Publication 530 is met. One test is that the funds the buyer provided at or before closing, plus any points the seller paid, were at least as much as the points charged. If a test fails, the points are deducted over the life of the loan.

For a refinance, Publication 530 says points are generally deducted over the life of the loan. If the refinance is with the same lender, the client cannot deduct the remaining points for that year.

For a rental, Publication 527 says the full amount of points is generally not deducted in the year paid, and the interest is deducted over the term of the loan. Example: a 30-year rental loan closed in January 2026 has 360 monthly shares. Divide the points by 360 and deduct 12 shares on Schedule E for 2026, one-thirtieth of the points. Keep that calculation with the closing statement.

Property tax bills and the escrow reconciliation

The escrow deposit is not the deduction. Publication 530 says the client can deduct only the real estate taxes the lender actually paid from escrow to the taxing authority, and the real estate tax bill shows that amount. Use the paid-to-county figure from the year-end escrow statement, plus the bill for any part the client paid directly.

If the year-end statement shows deposits higher than the payments to the county, the difference stays in the escrow balance. It is deducted in the year the lender pays it to the taxing authority, not in the year it was deposited.

Client wording: 'Please send your lender's 2026 year-end escrow statement, the 2026 property tax bill, and proof of any property tax you paid directly to the county or city.' If the lender paid only part of the bill, ask for both sides, because the two halves go into the same deduction.

Closing costs: deductible, added to basis or neither

Publication 530 says the only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes.

Added to basis: legal fees for the title search and for preparing the sales contract and deed, recording fees, owner's title insurance, and transfer or stamp taxes. For a rental, Publication 527 also adds abstract fees and title insurance to basis.

Not added to basis: fire insurance premiums, mortgage insurance premiums, and the fee for an appraisal the lender required. These are not deductible at closing. If the seller paid points, the buyer reduces basis by that amount. Sort every closing line into one of these three groups before preparing a rental depreciation schedule.

Schedule A for a home, Schedule E for a rental

A homeowner who itemizes enters deductible real estate taxes on Schedule A, line 5b, for real estate that was not used in a business. A landlord does not put the rental's property tax on line 5b. It goes on Schedule E, line 16, and interest paid to a bank or other financial institution on the rental mortgage goes on line 12.

For 2026, the Congressional Research Service reports the Schedule A cap on state and local taxes at $40,400. That is up from $40,000 for 2025. If the client's combined state income tax and home property tax is under that cap, the cap does not limit the deduction, but the client still has to itemize to claim it. Filers in the top 37% bracket lose 2/37ths of the deduction, which effectively limits it to $38,216.

The Schedule E lines for the property file are: line 3 for rent, line 6 for auto and travel, line 10 for tax preparation fees, line 12 for bank interest, line 14 for repairs, line 16 for taxes, line 18 for depreciation and line 19 for other expenses. These come from the 2025 instructions, so confirm them on the 2026 form.

Residential rental buildings are depreciated over 27.5 years under Publication 527. Depreciation starts when the property is placed in service, meaning ready and available for rent, not at closing. A unit bought in March and ready for tenants in July starts in July.

What to request for a rental property

Get Form 1098 from the lender for the rental loan. If the loan is from a private individual who is not in the business of lending, no Form 1098 is required, so ask for the year's interest total and the amortization schedule instead.

Get the year-end escrow statement and each 2026 property tax bill for line 16, and the purchase and any refinance settlement statements for points, basis and seller-paid points. Get a monthly rent ledger or bank deposits for line 3, along with the lease.

Get repair invoices for line 14, and keep improvements in a separate folder, because the cost of an improvement is recovered through depreciation. Get a mileage log for line 6 if the client drove to the property.

Client wording: 'Please send the Form 1098 for the rental loan, your 2026 property tax bill and year-end escrow statement, a monthly rent total, and the repair and improvement invoices.' Mark each invoice as one or the other.

How long to keep the records

The IRS says to keep records for 3 years unless a longer rule applies. Six years applies when income that should have been reported is left out and the omitted amount is more than 25% of the gross income on the return. Seven years applies to a claim for a loss from worthless securities or a bad debt deduction.

Property records follow a different rule. Keep the purchase settlement statement, improvement invoices and depreciation schedules until the period of limitations expires for the year the property is sold or otherwise disposed of.

Failure modes and fixes

Rental interest on Schedule A. A landlord who enters the mortgage interest from Form 1098 on Schedule A has the wrong schedule. Move it to Schedule E, line 12, and keep Schedule A for the home only.

Refinance points missing. A refinance Form 1098 does not show refinance points in Box 6. Check the refinance closing statement, and if points were paid in 2026, track them over the loan term.