Points

[VondenHogenBeaverHausen]

Fact Pattern:

A taxpayer substantially improved their home by adding a huge addition.

May we take the points in full since it is to improve or must we amoritize them over the life of the loan?

Is this points on "purchase" or "refinance" is what this comes down to?

Thanks.

[skhyatt]

I believe points on a refinance for improvements is deductible in full.

[jainen]

$1,000,000 limit

>>deductible in full<<

Several years ago we started running up against the $100,000 limit on home equity loans. Now we are also having problems with the $1,000,000 limit in home acquisition debt.

[Black Bart]

For one home?

>>deductible in full<<

Several years ago we started running up against the $100,000 limit on home equity loans. Now we are also having problems with the $1,000,000 limit in home acquisition debt.

Gosh; for only another four million you could buy the whole town of Dogpatch!

[Black Bart]

Von--please excuse

the intrusion on your thread--jainen's posts are always somewhat shocking to me.

About your points--this from Pub. 17: HOME IMPROVEMENT LOAN--"You can also fully deduct in the year paid, points paid on a loan to improve your main hom, if tests 1 through 6 are met." I think it basically means if you're not doing anything unusual. Try Googling page 146 of the pub to read the six tests.

Also says something about refinancing: "If you use part of the refinanced mortgage proceeds to improve your main home and you meet the six tests listed, you can deduct the part of the points related to improvement in the year you pay them with your own funds." Sounds kinda like they want you pay in enough of your own dough at the time in an amount at least equal to the points deducted and can't use the proceeds from refinancing to pay it.

[jainen]

Truth is stranger

>>jainen's posts are always somewhat shocking<<

Truth is stranger than fiction. Where I live the AVERAGE price of a home is more than $700,000. Every day I have a client that refinanced last year with a quarter million cash out. Sometimes it goes to major improvements, but more often they just blow it on new toys. It's a hard rain gonna fall--our market has already collapsed more than 10% in the last six months.

http://www.santacruzsentinel.com/archive/2006/March/11/biz/stories/01biz.htm