I bought a coop in September 2023, primary residence, first home. I paid $2,600 in points on a 30 year Loan in 2023. How come I can only deduct $27 in 2023?

[DianeW777]

It depends.  Review the qualifications below to see if you meet them. If you do meet the qualifications you should enter the full amount of your points when asked during the mortgage interest entry (whether or not the points are shown on your 1098).  

• IRS Topic 504-Home Mortgage Points

Deductible points

1. If you itemize deductions on Schedule A, points which meet certain criteria may be deductible as home mortgage interest. You can deduct the points to obtain a mortgage or to refinance your mortgage to pay for home improvements on your principal residence, in the year you pay them, if 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.
2. The points relate to a mortgage to buy, build, or improve your principal residence (the home you live in most of the time).
3. Your principal residence secures your mortgage.
4. Paying points is an established business practice in the area where the loan was made.
5. The points paid weren't more than the amount generally charged in that area.
6. You provide funds, at or before closing, at least equal to the points charged. You can't use funds borrowed from your lender or mortgage broker to pay the points. However, amounts the seller pays for points on your loan is treated as paid directly by you from unborrowed funds, provided you subtract the amount of the seller-paid points from your basis (purchase price) in your home.
7. The points were computed as a percentage of the principal amount of the mortgage, and
8. The amount shows clearly as points on your settlement statement.