points deduction

[Geobio48]

Program keeps amortizing my points but I don't want to amortize. How do I override program?

[MaryK4]

If you do not want to amortize your points, you should remove the entry.  Unless it is a rental or business property, you must amortize if you want to deduct the points.

[Geobio48]

Naturally I was confused because the On Demand resource in the program says:

"Note: If you purchased your home in 2022 or refinanced it to make improvements, we'll deduct all of your points on your current tax return rather than amortize them over the life of the loan."

Since we purchased our home in 2022, I was trying not to amortize the points.

[DMarkM1]

Yes, be sure you meet the qualifications to deduct the points in full in the year of purchase as shown below.  You can click here for more information on interest and points deductions from Publication 936. 

If you meet the qualifications return to the "Mortgage interest" topic and "Edit" the form 1098 for the loan.  You may need to delete the form 1098 entries and start the "Mortgage Interest" topic from scratch.  To deduct the points in full your interview answers should be:   

• It is your "Primary Home"
• "You paid points to purchase or improve your main home in 2022"
• Indicate where the points were reported (1098 box 6 or HUD statement)
• Put in the full amount of points in the box
• "Yes" The 1098 is the most recent for your loan

This should allow the full amount of points to be deducted assuming your average loan balances have not exceeded the $750K limit for 2022. If your interest deduction has been limited so will the points available to deduct.  

  You can fully deduct points in the year paid if you meet all the following tests.

• Your loan is secured by your main home. (Your main home is the one you ordinarily live in most of the time.)
• Paying points is an established business practice in the area where the loan was made.
• The points paid weren't more than the points generally charged in that area.
• 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. Most individuals use this method.
• The points weren't paid in place of amounts that are ordinarily stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes.
• The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. The funds you provided aren't required to have been applied to the points. They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. You can't have borrowed these funds from your lender or mortgage broker.
• You use your loan to buy or build your main home.
• The points were figured as a percentage of the principal amount of the mortgage.
• The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. The points may be shown as paid from either your funds or the seller's.

Note.

If you meet all of these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the life of the loan.

Home improvement loan.

You can also fully deduct in the year paid points paid on a loan to substantially improve your main home if tests 1 through 6 are met.