Refinanced in December, Paid points, No 1098 issued. How to input points in TurboTax

[Beeone]

I refinanced in December of 2020, Closing date of Dec 23rd. The new mortgage co., will not issue a 1098 due to the fact that my 1st mortgage payment was not due until February 2021. Question? Where can I input the points deduction in the TurboTax program since the points were paid in 2020. I have the Closing Disclosure to show proof of points paid.

[RayW7]

As far as filing taxes goes, claiming a tax deduction for mortgage points is a fairly straightforward process. Mortgage points are considered an itemized deduction and are claimed on Schedule A of Form 1040. Here are the specifics:

• Usually, your lender will send you Form 1098, showing how much you paid in mortgage points and mortgage interest
• Transfer this amount to line 10 of Form 1040 Schedule A
• If any of your points were not included on Form 1098, enter the additional amount you paid on line 12 of Form 1040 Schedule A

For many taxpayers, the process really is this simple. In some cases, though, calculating and deducting mortgage points can be tricky. With TurboTax, just answer a few simple questions and we can help you get the proper deduction for your mortgage points.

[Beeone]

First of all, thank you for replying to my question? But you state Line 12 of Schedule A, that line attends to Gifts to Charity. Can you clarify.

[DianeW777]

You are correct. Schedule A, Lines 8b and 8c report mortgage interest and points, respectively, that were not reported on a Form 1098.

If you paid Points/Loan Origination that qualifies, you can deduct them even if they aren't  reported on you 1098.  You still enter the amount as though you have a Form 1098, by entering the information necessary for your deduction. 

Be sure to review the article at this link to determine if your points are fully deductible or if they must be deducted ratably over the life of the loan.

• Can I deduct mortgage points?
• IRS Publication 936  (Check out Refinancing)

[hebrewjr]

@DianeW777 thanks for the clarification on this thread, I'm running into the same issue, I refinanced and received the associated 1098 for the new loan, but the lender did not include the dollar amount I paid for the points (box 6 says .00).  I called them, they said they dont report it on the 1098, just use the value from the final closing statement document they sent me.  

If I enter these points as an additional 1098 in Turbotax, do you know if that actually gets listed as a 1098 when my taxes are submitted to the IRS?  Or does that get translated and documented on the Schedule A?  I want to avoid reporting a 1098 in my taxes that subsequently does not get reported from my lender (which would not line up on the IRS side and I imagine could trigger an audit).  

Also Turbotax states that you must amortize the points over the lifetime on the loan, but when I go to the screen that says "Tell us about the points paid to <lender_name>", on the checkbox that says "I'm spreading the points over the life of my loan (amortizing)", clicking "Learn More", the subsequent help window says "Note: If you purchased your home in 2020 or refinanced it to make improvements, we'll deduct all of your points on your current tax return rather than amortize them over the lifetime of the loan".  That seems to contradict everything else I read where you are required to amortize the points over the lifetime of the loan when its a refi.  Can you confirm what is supposed to be done here?

[DianeW777]

It gets entered on the Schedule A but the actual Form 1098, although a convenience for easiest entry is provided to the IRS as an exact duplicate of what you received, from the same financial institution. It doesn't cause any reason for concern for any audit when you enter the actual points you paid in this entry spot.

Whether you must amortize over the life of the loan or deduct them in full in the year paid depends on certain qualifications.  You can view them at the link: IRS Topic 504-Home Mortgage Points.  A summary is listed below.

Points are allowed to be deducted ratably over the life of the loan or in the year that they were paid. You can deduct the points in full in the year you pay them, if you meet all the following requirements:

1. Your main home secures your loan (your main home is the one you live in most of the time).
2. Paying points is an established business practice in the area where the loan was made.
3. The points paid weren't more than the amount generally charged in that area.
4. 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.
5. The points paid weren't for items that are usually listed separately on the settlement sheet such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes.
6. The funds you provided at or before closing, including any points the seller paid, were at least as much as the points charged. You can't have borrowed the funds from your lender or mortgage broker in order to pay the points.
7. You use your loan to buy or build your main home.
8. The points were computed as a percentage of the principal amount of the mortgage, and
9. The amount shows clearly as points on your settlement statement.

You can also fully deduct (in the year paid) points paid on a loan to improve your main home if you meet tests one through six above.

You can deduct points paid for refinancing generally only over the life of the new mortgage. However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first six requirements stated above, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. You can deduct the rest of the points over the life of the loan.

[hebrewjr]

Thanks @DianeW777 , thats very helpful.  One more clarification, if I pulled cash out as part of the refi and used that to pay down points, I assume that counts as borrowing on the loan, in which case I need to spread out over the lifetime of the loan, correct?  Thanks again!

[Beeone]

Thank you. I read Pub 936 and also talked to a CPA. She told me to wait and put it in for 2021, since no 1098 was produced by the loan co, because my closing date was 12/30/20.  Thank you for the reply.