Deductions & credits

In the year you buy the home, you may be able to deduct:

1. Points.  Points are a fee used to get a discount on the interest rate.  They might not be listed on your 1098 form.  Points are considered a form of mortgage interest if they are a percentage of the loan amount (not a fixed fee) and if they are not assigned to any specific purpose (like the bank attorney, surveying, etc.).  Depending on the amount of cash you brought to close, points might be fully deductible in the year you closed, or you might have to spread them out over the length of the mortgage.  The interview will ask you questions to determine this.

2. Daily interest.  You likely paid interest from the closing date to the last day of the month as part of your closing costs.  That daily interest is deductible, but it might not be included in the interest reported on the 1098.  It will be shown on your closing statement.

3. Property taxes.  You can deduct taxes paid on the property for the dates you owned the property, even if you didn't pay the tax directly to the taxing authority.  For examples, suppose the property tax bill is assessed for 1/1/22-12/31/22 and paid on Feb 15.  You bought the home in July.  You would have paid the seller a property tax credit for the days that they paid for (in advance) that you owned the home, shown on your closing statement.  Those taxes are deductible as if you paid them to the city directly.    On the other hand, suppose you live in a state where property taxes are charged in arrears.  You will be billed on January 15, 2023, for the entire 2022 year.  You can only deduct the portion of taxes that correspond to the dates you owned the property.