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MequonCPA
MequonCPA, Certified Public Accountant (CPA)
Category: Tax
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Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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If I buy a 1st home with the closing date this year with points,

Resolved Question:

If I buy a 1st home with the closing date this year with points, can I deduct the points next year or spread them across the 30 year period.
Am I better off with the closing date of next year?
I am unable to deduct the points paid this year as I am using standard deduction.
Submitted: 2 years ago.
Category: Tax
Expert:  MequonCPA replied 2 years ago.
Hi and welcome to JustAnswer:

If you close this year, you can elect to deduct 100% of the points this year or you can deduct the points over the term of the mortgage.

You cannot defer the 100% deduction to next year.
Customer: replied 2 years ago.
Turbotax is saying I cannot deduct points over the term as I am not refinancing the house.
as our house loan is over 250k.
Is it that true?
Thanks
Expert:  MequonCPA replied 2 years ago.

Turbotax is incorrect in this situation. See the "Note" in the third column of Page 4 of IRS Publication 530, link below.

 

http://www.irs.gov/pub/irs-pdf/p530.pdf

 

Customer: replied 2 years ago.
If I cannot deduct 100% next year, the only choice I have is to spread equally over the life of loan or I can spread unequally over the life of loan?
Expert:  MequonCPA replied 2 years ago.
It must be spread equally over the life of the loan.
Customer: replied 2 years ago.
But if I am not taking itemized deduction in a certain year, how will it work?

I am planning to close this year and use the your advice to spread them.
Expert:  MequonCPA replied 2 years ago.
Turbotax should keep a record for you. It the system can't handle it, you will need to keep a schedule and report the appropriate amounts each year. For example if your points are $2,400 and you have a 30 year loan, you are entitled to deduct $80 each year as points.

Whether you itemize or not, this allowed amount reduces the unamortized amount. If you should refinance or sell the property the unamortized amount is deductible at that time. Example you sell the property after owning it for 60 months. You would have been allowed to deduct $400, leaving an unamortized balance of $2,000. The $2,000 is deductible in the year of the sale.
MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2323
Experience: CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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