Client had a new home built and on the 1098, there was an amount of $4934. for points. Would this all be deductible in the first year? Not sure whether he actually paid these points or if it was rolled into the balance of the mortgage.
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Request a copy of the HUD-1 settlement statement. That will tell you whether he paid them or rolled into financing. -
If Financed?
If financed, would it be amortized over the years of the mortgage?Comment
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Points on 1098 Form
The points listed on the 1098 form may or may not be deductible. It would depend on whether they were actually paid? Is that the way we are to understand it? If they were not paid, then we amortize them over the years? The figure on the 1098 form is only there to show us that there actually were points charged?Comment
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Yes, Yes, Yes.
Perhaps this chart will help.
Look on page 6.
And if the client can't itemize and even if the points can be deducted in the year they bought their home - they can be amortized. It is good to set this up in case they can itemize in the future - or they refinance at some point with a new lender, take the remaining points left over and can itemize that year.JGComment
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Deduct in year of purchase/amoritze?
Is it an option to amortize if one cannot itemize in the year of purchase?Yes, Yes, Yes.
Perhaps this chart will help.
Look on page 6.
And if the client can't itemize and even if the points can be deducted in the year they bought their home - they can be amortized. It is good to set this up in case they can itemize in the future - or they refinance at some point with a new lender, take the remaining points left over and can itemize that year.Comment
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Yes, It is a choice. If all points qualify for current deduction, amortization can be elected instead.Comment
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