Updated October 18, 2026. Quick answer: Line 16a is for interest on a mortgage on real property used in your business when you received a Form 1098. Line 16b is for other business interest, including mortgage interest with no Form 1098. Interest allocation and the business interest limit can change the amount you enter.
S corporation return (Form 1120-S) for 2025, read line by line: Form 1120-S lines 13 to 22.
Partnership return (Form 1065) for 2025, read line by line: Form 1065 lines 15 to 18.
What lines 16a and 16b ask for
The form’s caption reads “Interest (see instructions)”, with line 16a for “Mortgage (paid to banks, etc.)” and line 16b for other interest. The instructions say “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.”
Allocating and limiting the interest
The instructions begin with allocation: “The tax treatment of interest expense differs depending on its type.” They explain the method: “Generally, you allocate interest expense by tracing how the proceeds of the loan were used.” “See chapter 4 of Pub. 225, generally, for details.”
For a vehicle used for both business and personal purposes: “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.”
On the business interest limit, the instructions say 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 Form 8990 applies, “figure the limit on your business interest expenses on Form 8990 before completing lines 16a and 16b.” “The interest you can’t deduct this year will carry forward to next year on Form 8990.”
Where the number comes from
Line 16a comes from the interest shown on the Form 1098 your lender sent. Line 16b comes from your own payment records for interest with no Form 1098. The instructions add: “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”.
They also say “Don’t include mortgage interest that must be capitalized, for example, added to basis.” For a shared mortgage where 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.” And for interest that covers more than one year: “deduct only the part that applies to 2025.”
Where it goes next
Each Part II expense line is a step toward the total on line 28. The form describes it as “Total expenses before expenses for business use of home. Add lines 8 through 27b”. Line 29 then reads “Tentative profit or (loss). Subtract line 28 from line 7”. Part II also carries this heading: “Expenses. Enter expenses for business use of your home only on line 30.” Lines 28 and 29 are explained on the Schedule C lines 27a to 29 page and line 30 on the Schedule C line 30 page. Home office costs are reported separately, not on these lines. The overall form is explained on the Schedule C (Form 1040) page, and the return it attaches to is the Form 1040.
Edition and line numbers
This page reads the 2025 Schedule C (Form 1040) and its 2025 instructions, the current files irs.gov served on 2026-10-18. They are the files for the tax year 2025 return, filed in 2026. The schedule’s heading says “Attach to Form 1040, 1040-SR, 1040-SS, 1040-NR, or 1041”. Check the tax year printed on the schedule you are filling in and use the line numbers on that year’s schedule, because a different year’s schedule can number or word its lines differently.
Common mistakes
- Entering a Form 1098 mortgage on line 16b. The instructions say to enter the interest “on line 16a” when you received a Form 1098, and on line 16b only when you did not.
- Skipping the Form 8990 check. The instructions say you “must file Form 8990 to deduct any interest expenses of this trade or business unless you are a small business taxpayer” or meet another listed exception.
- Deducting interest that belongs to another year. The instructions say “deduct only the part that applies to 2025.”
Related: Schedule C (Form 1040), Form 1040, and Form 1040 line by line.
Sources
- Instructions for Schedule C (Form 1040), Profit or Loss From Business (2025): https://www.irs.gov/pub/irs-pdf/i1040sc.pdf
- Schedule C (Form 1040), Profit or Loss From Business (2025): https://www.irs.gov/pub/irs-pdf/f1040sc.pdf
Read from the IRS documents linked above on October 18, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.