How should taxpayers substantiate mortgage interest and medical expense deductions under 2025 rules?
This fact-check may be outdated. Consider refreshing it to get the most current information.
Executive summary
Taxpayers substantiate mortgage interest on Schedule A using Form 1098 from lenders and IRS Publication 936 guidance; points and prepaid interest may require allocation over years (see IRS Publication 936 and IRS PDF) [1] [2] [3]. Medical expenses are deductible only to the extent they exceed 7.5% of AGI and only if you itemize instead of taking the 2025 standard deduction (e.g., roughly $15,750 single; $31,500 MFJ in reporting estimates) [4] [5].
1. Paper trail first: the Form 1098 is your starting point
The single most important document for mortgage-interest substantiation is Form 1098, which lenders send by January when you paid at least $600 of interest; enter the amount shown on Schedule A of Form 1040 to claim the deduction, per consumer guidance and Taxfyle’s 2025 overview [1]. The IRS’s Publication 936 and its full PDF reinforce that taxpayers should rely on lender statements and examples in the manual when figuring deductible interest and points [2] [3].
2. Points, prepaid interest and refunds: don’t assume the box tells the whole story
Publication 936 warns that not all deductible amounts appear straightforwardly on Form 1098: some “points” reported may not be deductible depending on filing status or the loan’s use, and prepaid interest that accrues into the next tax year must be allocated to the year it actually accrued [2]. The IRS PDF gives examples showing how to prorate points and prepaid interest across years and how refunds of overpaid interest are reported, so keep settlement statements and lender correspondence [3].
3. Itemize only if it beats the standard deduction
Multiple consumer guides stress: mortgage interest yields no tax benefit unless you itemize. For 2025, widely cited standard-deduction figures (used in lay tax guidance) mean many taxpayers will still find the standard deduction larger than the sum of mortgage interest plus other itemized items [1] [5] [4]. Practical implication: compile all itemizable items (mortgage interest, SALT up to the cap, medical over the AGI threshold, charitable gifts) and compare to the standard deduction before trying to substantiate anything further [1] [4].
4. Medical deductions: document everything and mind the 7.5% AGI hurdle
Medical expenses are deductible only to the extent they exceed 7.5% of your adjusted gross income and only if you itemize; reputable tax guides for 2025 emphasize that the medical-deduction threshold—and the high standard deduction—means only unusually large medical bills will produce a deduction [4]. Keep bills, receipts, insurance reimbursements and mileage logs; Publication 936-style IRS materials and tax-advice outlets uniformly stress thorough records even when only a portion of expenses will qualify [4].
5. Know the mortgage-interest limits and why that matters for substantiation
Whether you can deduct all interest depends on loan type and limits: the TCJA-era $750,000 cap for acquisition debt (or applicable grandfathering) versus pre‑2018 $1M rules affects how much interest is deductible and therefore how you report it; congressional and commercial summaries explain that these caps govern whether interest on your entire loan is deductible [6] [7]. Because limits can change by purchase date or congressional action, preserve closing disclosures and loan records proving origination dates and the use of proceeds [6] [7].
6. Practical checklist: documents to keep and where they feed on the return
Retain Form 1098, closing disclosure/settlement statements (showing points), monthly mortgage statements (for interest allocation), proof of prepaid interest or refunds, medical receipts and insurer explanations of benefits, and records of use of loan proceeds (to demonstrate acquisition vs. home‑equity use). Use Schedule A to report mortgage interest and qualifying medical expense amounts after applying the 7.5% AGI floor [1] [2] [3] [4].
7. Conflicting signals and policy caveats: watch for legal changes
Sources show two competing narratives: some outlets describe 2025 as a year when TCJA limits still matter (and possibly revert in 2026), while later reporting about the “One Big Beautiful Bill” or similar legislative actions depicts permanency for certain caps like the $750,000 threshold—so taxpayers should corroborate their individual status with IRS guidance and their tax preparer because law and reporting evolve [6] [8] [9]. Available sources do not mention authoritative 2025 IRS forms beyond Publication 936 and Form 1098 guidance for every factual nuance; consult the IRS and your preparer for the final filing positions [2] [3].
Limitations: this account draws only on the supplied 2024–2025 guidance and consumer tax reporting; for unresolved points about post‑2025 legislative changes and exact standard‑deduction amounts applied by the IRS, rely on the IRS or a tax professional because available sources here include media summaries and IRS publications that may not reflect late legislative changes [6] [8] [9].