I'm completing taxes for 2020 and my form 1098 has Points Paid in box 6 for home I purchased in 2020 and paid points up front. Turbo Tax does not ask for box 6 points amount and I do not see where to enter amount to claim this deduction. I am not paying points over life of loan as I paid them at closing. The software is not asking for this but I want to enter it. Thank you.

Please try this. Points on Loans on New Loans: You will want to enter a separate 1098 to cover these points paid. When prompted, enter 0.00 for Boxes 1, 2, 5, and the Property (real estate) taxes box, and checkbox 7, as you’ve already entered the details on your first 1098. For Box 3, add the date in 2020 when the loan originate You can deduct points for your main home, if all of the following conditions apply: They're discount points (see the definition) The mortgage is used to buy, build, or improve the home, and the home is the collateral for the loan Paying mortgage points is a customary practice in your area and the points you paid aren't excessive for your neighborhood The points were paid directly to the lender, either by you or the seller (no borrowing) Your down payment, plus any points the seller paid, exceed the points paid amount You use the cash method of accounting (almost all taxpayers do) The points are calculated as a percentage of the mortgage principal (not required on home-improvement loans) The points are clearly itemized on your settlement statement as points (not required on home-improvement loans)If you meet all the above criteria, you can either deduct all your points in the year you paid them or deduct them in equal increments over the life of the loan. Either way, you'll need to itemize to get the deduction.The deduction for mortgage interest is capped at $750,000 of debt. Interest on up to $1 million of acquisition debt for loans prior to December 15, 2017 is grandfathered.

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Motorider

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Solved

Mortgage Points Paid

Forum|Forum|5 years ago
February 18, 2021
1 reply
0 views

I'm completing taxes for 2020 and my form 1098 has Points Paid in box 6 for home I purchased in 2020 and paid points up front. Turbo Tax does not ask for box 6 points amount and I do not see where to enter amount to claim this deduction. I am not paying points over life of loan as I paid them at closing. The software is not asking for this but I want to enter it. Thank you.

Best answer by Cynthiad66

Please try this.

Points on Loans on New Loans: You will want to enter a separate 1098 to cover these points paid. When prompted, enter 0.00 for Boxes 1, 2, 5, and the Property (real estate) taxes box, and checkbox 7, as you’ve already entered the details on your first 1098. For Box 3, add the date in 2020 when the loan originate

You can deduct points for your main home, if all of the following conditions apply:

They're discount points (see the definition)
The mortgage is used to buy, build, or improve the home, and the home is the collateral for the loan
Paying mortgage points is a customary practice in your area and the points you paid aren't excessive for your neighborhood
The points were paid directly to the lender, either by you or the seller (no borrowing)
Your down payment, plus any points the seller paid, exceed the points paid amount
You use the cash method of accounting (almost all taxpayers do)
The points are calculated as a percentage of the mortgage principal (not required on home-improvement loans)
The points are clearly itemized on your settlement statement as points (not required on home-improvement loans)

If you meet all the above criteria, you can either deduct all your points in the year you paid them or deduct them in equal increments over the life of the loan. Either way, you'll need to itemize to get the deduction.

The deduction for mortgage interest is capped at $750,000 of debt. Interest on up to $1 million of acquisition debt for loans prior to December 15, 2017 is grandfathered.

Cynthiad66Answer

Level 14

Please try this.

You can deduct points for your main home, if all of the following conditions apply:

They're discount points (see the definition)
The mortgage is used to buy, build, or improve the home, and the home is the collateral for the loan
Paying mortgage points is a customary practice in your area and the points you paid aren't excessive for your neighborhood
The points were paid directly to the lender, either by you or the seller (no borrowing)
Your down payment, plus any points the seller paid, exceed the points paid amount
You use the cash method of accounting (almost all taxpayers do)
The points are calculated as a percentage of the mortgage principal (not required on home-improvement loans)
The points are clearly itemized on your settlement statement as points (not required on home-improvement loans)

The deduction for mortgage interest is capped at $750,000 of debt. Interest on up to $1 million of acquisition debt for loans prior to December 15, 2017 is grandfathered.

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alo2021

Level 2

Cynthiad66: when you say, "If you meet all the above criteria, you can either deduct all your points in the year you paid them or deduct them in equal increments over the life of the loan. Either way, you'll need to itemize to get the deduction."

Question: Is this my choice?

Although I can deduct all the points in this year's return (because I purchase the house as my residence, not a refinance operation), I don't want to do so. I do not have enough itemize deduction this year, i.e. I will use the Standard Deduction method to file my return. Hence, if I do not spread the points, the whole amount of the points will be lost. If I choose to spread the points over the life of the loan, I may have a chance to itemize in future years and get some deduction whenever I itemize. So is it my choice to deduct all the points in one year or spread it over the life of the loan? Thanks.

JohnW152

Level 15

@alo2021

Yes, it's your choice, but to deduct the points ratably (equally) over the life of the loan, you have to meet certain requirements.

According to Deduction Allowed Ratably in the IRS’s Publication 936, Home Mortgage Interest Deduction,

1. 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.

2. Your loan is secured by a home. (The home doesn't need to be your main home.)

3. Your loan period isn't more than 30 years.

4. If your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period.

5. Either your loan amount is $250,000 or less, or the number of points isn't more than:

a. 4, if your loan period is 15 years or less; or

b. 6, if your loan period is more than 15 years.