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This should be included as "points paid" on your tax return. If given the opportunity by your software or on paper, you should classify it as "not reported on Form 1098". The full amount should be reported for 2009.
This was not include in the points paid Box 2 on my 1098 but in the interest detail section. When i spoke to my lender wells fargo they said they only include buyer paid points in that box. So i can still go ahead and deduct the entire 3068.67 on my tax return under points not reported as you stated above? I just want to make sure in case IRS comes back and audits me. Thanks for your help
It is true that the lender will not report the points in that manner. However, as the buyer, you (and the lender on your behalf) are the only person who brought any money to the table and, therefore, you paid the points even though they were deducted on the seller's column. This is fairly well established tax law.