Construction to Permanent Load - Points on the loan

[tdgross5]

We closed on a construction-to-permanent loan in 2022. We paid $4,000 in points on the loan. When I filed my 2022 tax return, I chose to amortize the points over the loan life ($133 deduction each year for 30 years) as we had anticipated this being a secondary home. We moved in on late 2023 and have since decided to make this our primary residence; we have obtained drivers licenses, transferred titles to cars, and registered to vote in the state of our new home. My question: can I now change from amortizing the points over 30 years, and deduct the remaining $3,867 points on my 2023 tax return? If I can, how would I accomplish this in TurboTax? Thanks in advance.

[zomboo]

You can only deduct all of the points in the year they were paid provided you paid escrow funds out of pocket in an amount equal to the points deducted. Since you opted to amortize the points in 2022, you must continue to do so in the years remaining on the mortgage until it is paid off or refinanced. At which time, any remaining points can be deducted.

[tdgross5]

Would it be possible to amend my 2022 return and not amortize the points? Or am I asking for an audit?

[zomboo]

You should consult a tax expert on this but here is my take. If you have not filed this year yet, I would think yes you can amend your 2022 tax return and claim all of your points paid. However, you must have actually paid some expense out of pocket when closing the loan equal to the amount of points you want to deduct. The expenses you paid didn't have to be specifically for points. Did you pay any expenses out of pocket when securing the mortgage?

Also, after amending your federal tax return, you may need to amend your state return.

[tdgross5]

Yes. I actually had over $18,000 in costs for the loan...builder's risk policy, appraisal fees, title insurance, taxes, etc. I paid approximately $8,900 in cash/out of pocket at the closing and rolled the rest of the costs into the loan.

[zomboo]

That will work.