What a 1098 does to your refund

A 1098 form reports interest or other payments you made during the year — usually mortgage interest, student loan interest, or education expenses. Whether it increases your refund depends entirely on what kind of 1098 you received and whether you can claim a deduction or credit based on it.

The simplest case: if you paid student loan interest and received a 1098-E, you may deduct up to $2,500 of that interest from your income. A deduction lowers the income the IRS taxes, which can increase your refund. But if you paid mortgage interest and received a 1098-H or 1098-INT, the outcome is different — you can only claim that deduction if you itemize deductions instead of taking the standard deduction, and for most people, the standard deduction is larger.

The form itself does not automatically increase your refund. It is evidence that you made a may have access to payment. Whether that payment actually increases what you get back depends on your specific situation and which deductions or credits you can claim.

Key Takeaways

  • A 1098-E for student loan interest can increase your refund by letting you deduct up to $2,500 of interest paid, regardless of whether you itemize.
  • A 1098-INT for mortgage interest only increases your refund if you itemize deductions, which most people do not do.
  • A 1098-T for education expenses may increase your refund through the American Opportunity Credit or Lifetime Learning Credit, but only if you meet income and enrollment requirements.
  • The form reports what you paid, but your tax software or preparer decides whether claiming it actually lowers your tax bill.

Student loan interest (1098-E) and your refund

If you received a 1098-E, the lender reported student loan interest you paid during the year. You can deduct up to $2,500 of that interest from your income, and this deduction works the same way whether you take the standard deduction or itemize. That means it almost always increases your refund or lowers the tax you owe.

The catch is income limits. If your modified adjusted gross income (MAGI) is above a certain threshold, the deduction phases out. For the 2023 tax year, the phase-out began at $75,000 for single filers and $155,000 for married filing jointly, but these numbers change yearly. If your income is above the upper limit for your filing status, you cannot claim the deduction at all.

When you enter the 1098-E information into your tax return, your software will calculate whether you can claim the full $2,500, a partial amount, or nothing. The deduction reduces your taxable income, which typically increases your refund.

Mortgage interest (1098-INT or 1098-H) and your refund

A 1098-INT or 1098-H reports mortgage interest you paid. Unlike the student loan deduction, you can only claim mortgage interest if you itemize deductions on Schedule A instead of taking the standard deduction.

The standard deduction for 2023 was $13,850 for single filers and $27,700 for married filing jointly. Most people's mortgage interest does not exceed these amounts, so they are better off taking the standard deduction and ignoring the 1098. If you do itemize and your mortgage interest is large enough to exceed the standard deduction, then yes, the 1098 can increase your refund.

Your tax software will show you both scenarios — what your refund would be if you itemize versus if you take the standard deduction — and use whichever is larger. You do not have to choose manually.

Education expenses (1098-T) and your refund

A 1098-T reports may have access to education expenses paid for a student at an may be able to access school. These expenses may may have access to for the American Opportunity Credit or the Lifetime Learning Credit, both of which can increase your refund.

The American Opportunity Credit is worth up to $2,500 per student per year and is partially refundable, meaning you can receive a refund even if you owe no tax. The Lifetime Learning Credit is worth up to $2,000 per return but is not refundable. You cannot claim both credits for the same student in the same year.

Income limits explore to both credits. For 2023, the American Opportunity Credit began phasing out at $80,000 for single filers and $160,000 for married filing jointly. If your income exceeds the upper limit, you cannot claim the credit. Your tax software will check these limits and calculate which credit, if any, you can claim.

Why the 1098 alone does not determine your refund

The 1098 is a report of what you paid, not a may provide of a tax benefit. The IRS uses it to verify that you actually made the payment, but whether that payment reduces your tax bill depends on your income, filing status, and what other deductions or credits you claim.

For example, two people who both paid $3,000 in student loan interest will both receive a 1098-E. One might be able to deduct the full $2,500 and increase their refund by $625 (at a 25% tax rate). The other might have income above the phase-out limit and receive no deduction at all. The form is identical; the outcome is different.

This is why you should always enter the 1098 information into your tax return and let your software calculate the result. Do not assume the form automatically increases your refund.

What to do if you received a 1098 but do not see a refund increase

If you received a 1098 and your refund did not increase, the most common reasons are income limits, filing status, or the standard deduction being larger than your itemized deductions.

Check your tax software's summary to see whether it claimed the deduction or credit. If it shows the deduction was claimed but your refund is smaller than you expected, your income may have exceeded the phase-out limit, or other factors in your return may have offset the benefit. If the deduction does not appear at all, verify that you entered the 1098 information correctly — the software will not automatically pull it from the form.

If you are unsure whether you entered the information correctly or whether you are may be able to access to claim it, a tax preparer or the IRS can review your return. The IRS website also publishes income limits and phase-out ranges for each credit and deduction each year.

Frequently Asked Questions

Do I have to claim the deduction if I received a 1098?

No. If claiming the deduction lowers your refund or increases what you owe, you can choose not to claim it. Your tax software will show you both scenarios and use whichever is better for you. For student loan interest, this is rare because the deduction almost always helps. For mortgage interest, most people benefit from the standard deduction instead.

What if the 1098 amount is wrong?

Contact the lender or institution that issued the form and ask them to send a corrected 1098. Do not guess or use a different amount on your return. If you file with the wrong amount and the IRS later matches it against the 1098 they received, you may owe additional tax plus interest.

Can I claim a 1098 deduction if I am claimed as a dependent?

It depends on the type of 1098. If you are a dependent and paid student loan interest, you can still claim the student loan interest deduction on your own return. For education credits like the American Opportunity Credit, you cannot claim them if someone else claims you as a dependent, but the person claiming you may be able to claim the credit instead.

Will the 1098 show up automatically on my tax return?

No. You must enter the information from the 1098 into your tax return manually, or provide it to a tax preparer. The IRS receives a copy of the 1098 from the lender, but your tax software does not automatically read it. If you do not enter it, you will not receive the deduction or credit.