Points

[Conclar]

I purchased a main home last year and paid points but I did not have enough deductions to itemize for federal taxes. The loan was refinanced with a different lender in 2021. When I entered the points paid Turbo Tax did not calculate a deduction for the total points paid, which it should have since they were not deducted in 2020. Turbo Tax was used in 2020 and the info brought over to 2021. How do I deduct the total amount for points paid? I haven't started state taxes so I'm not sure if it will recognize the points were deducted last year since I was able to itemize state taxes.  

[ColeenD3]

You can't. Since you were unable to deduct them in the year paid, you must amortize them.

Points are allowed to be deducted ratably over the life of the loan or in the year that they were paid. You can deduct the points in full in the year you pay them, if you meet all the following requirements:

1. Your main home secures your loan (your main home is the one you live in most of the time).
2. Paying points is an established business practice in the area where the loan was made.
3. The points paid weren't more than the amount generally charged in that area.
4. You use the cash method of accounting. This means you report income in the year you receive it and deduct expenses in the year you pay them.
5. The points paid weren't for items that are usually listed separately on the settlement sheet such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes.
6. The funds you provided at or before closing, including any points the seller paid, were at least as much as the points charged. You can't have borrowed the funds from your lender or mortgage broker in order to pay the points.
7. You use your loan to buy or build your main home.
8. The points were computed as a percentage of the principal amount of the mortgage, and
9. The amount shows clearly as points on your settlement statement.