Not sure if points are being deducted properly

Forum|Forum|3 years ago
February 26, 2023
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I bought a home in 2022

I have two 1098 forms for the purchased home, one with the original lender, and another lender that the loan was sold to a few months later in 2022.

I paid 4,099.59 in points, and I can see this amount on the first 1098 as "Points paid on purchase of primary residence". The second 1098 does not have a value entered here.

I entered both 1098 forms, and I put the points in with the first one, and did not put the points in under the second one. I marked the first one as "no" for "Is the 1098 you're working on the most recent for your loan?"

Having done all that, on the "Home loan deduction summary", I can see that the interest is listed for both lenders, and I can see that the Deductible Points is listed for the first 1098.

However, when I finish the "deduction and credits" and I see it itemize the various deductions and credits, I don't see the Points listed.

Messing around on the form, if I go back and enter the points under the second 1098 rather than under the first, it looks like it will then recognize the deduction.

Is that how I should enter the deduction for the points, under the second 1098? Not sure if I'm missing something, but I wouldn't imagine that it should matter whether or not the loan was sold to another lender. However, it does seem to matter whether I enter the amount under one particular lender or another.

Thank you!

Best answer by PatriciaV

Let's review some of the questions about the original loan (which should have a zero balance).

Yes, secured by a property you own.
Yes, new loan on which you paid points.
Yes, bought your main home with this loan.
Enter points paid on this loan.
Yes, loan was paid off. (This box appears under the dollar amount of points paid.)
Yes, this is the most recent 1098. (Revised instructions)
Not a HELOC or refinance.
Yes, used this loan only on the home.

For the new loan (which should have an outstanding balance):

Yes, secured by a property you own.
Yes, bought your main home with this loan.
(No points paid on this loan.)
Yes, this is the most recent 1098.
Not a HELOC or refinance.
Yes, used this loan only on the home.

On a test return, the answers above produce deductible points that flow to Schedule A Line 8a.

PatriciaV

Level 15

While your work-around may produce the result you expect, there is a better way to enter these two 1098s and preserve the correct information for next year's tax return.

First, delete the two 1098 entries you have made.
Now, enter the 1098 for the current lender who purchased the original loan. Indicate that this is the most recent 1098. Answer all questions related to this mortgage, which is not a refinance.
Then enter the 1098 for the first lender, including points and all other information. Mark this as NOT the most recent. Be sure you answer any questions regarding the use of those funds and how you wish to handle the points.
Continue to the end to save your entries.

Review the result for your deductions to confirm the numbers are as expected.

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nothingsknowerAuthor

Level 2

@PatriciaV

Hi,

I tried re-entering as you said, but the result was the same. The points on the original loan didn't end up being recognized as a deduction that shows the 2022 (and 2021) deductions and credits.

PatriciaVAnswer

Level 15

Let's review some of the questions about the original loan (which should have a zero balance).

Yes, secured by a property you own.
Yes, new loan on which you paid points.
Yes, bought your main home with this loan.
Enter points paid on this loan.
Yes, loan was paid off. (This box appears under the dollar amount of points paid.)
Yes, this is the most recent 1098. (Revised instructions)
Not a HELOC or refinance.
Yes, used this loan only on the home.

For the new loan (which should have an outstanding balance):