Lines 16a and 16b

Interest allocation rules.

The tax treatment of interest expense differs depending on its type. For example, home mortgage interest and investment interest are treated differently. “Interest allocation” rules require you to allocate (classify) your interest expense so it is deducted (or capitalized) on the correct line of your return and receives the right tax treatment. These rules could affect how much interest you are allowed to deduct on Schedule C.

Generally, you allocate interest expense by tracing how the proceeds of the loan were used. See chapter 4 of Pub. 225 , generally, for details.

If you use your vehicle for both business and personal purposes and you claimed a deduction in 2025 on Schedule 1-A (Form 1040) for the vehicle loan interest allocable to your personal use, then you can’t claim a deduction for that same interest on Schedule C. See Schedule 1-A (Form 1040) and its instructions for more information.

Limitation on business interest.

You must file Form 8990 to deduct any interest expenses of this trade or business unless you are a small business taxpayer (defined under Part III ) or meet one of the other filing exceptions listed in the Instructions for Form 8990.

If you must file Form 8990, figure the limit on your business interest expenses on Form 8990 before completing lines 16a and 16b. Follow the instructions under How to report , later, but report the reduced interest on lines 16a and 16b. The interest you can’t deduct this year will carry forward to next year on Form 8990.

If you are a small business taxpayer or meet one of the other filing exceptions for Form 8990, follow the instructions under How to report , later, and report all of your deductible interest on lines 16a and 16b.

How to report.

If you have a mortgage on real property used in your business, enter on line 16a the interest you paid for 2025 to banks or other financial institutions for which you received a Form 1098 (or similar statement). If you did not receive a Form 1098, enter the interest on line 16b.

If you paid more mortgage interest than is shown on Form 1098, include the amount on line 16a. Attach a statement to your return explaining the difference and enter “See attached” in the margin next to line 16a. Don’t include mortgage interest that must be capitalized, for example, added to basis. See Pub. 551 , under Uniform Capitalization Rules, for details.

The Tax Cuts and Jobs Act, section 11043, limited the deduction for mortgage interest paid on home equity loans and lines of credit. See section 163(h)(3)(F).

If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on the mortgage and the other person received the Form 1098, include your share of the interest on line 16b. Attach a statement to your return showing the name and address of the person who received the Form 1098. In the margin next to line 16b, enter “See attached.”

If you paid interest in 2025 that also applies to future years, deduct only the part that applies to 2025.