Seller paid for temporary 2-1 buydown fee to lower our interest payments for the first 2 years. It was listed in Section A of the Closing Disclosure. This amount is deposited in escrow and a fixed amount is applied to interest payment monthly. Is the seller paid buydown fee deductible?
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No. You cannot take a deduction for something someone else paid. So any portion of the interest that is paid with those funds, you would not deduct as an itemized expense if you are itemizing your return.
If you would have been the seller then you could have included it as a selling expense.
We added the 2-1 but down to the sales price which i technically paid for so why is this not a tax deduction?
The 2-1 interest buy down is prepaid interest and is therefore 'points'. If the seller supplied the funds for the buy down, it is still deductible as points for the buyer. In this case, the seller adds the amount of the buy down to the cost of selling the home and the buyer subtracts the buy down amount from the home basis.
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