Amortization of Mortgage Interest Points on Sch A

[j2kp0t]

Client itemizes infrequently. When he does itemize, my software properly calculates the amortization of points he paid some years ago; when he doesn't itemize, my software adds an amount for current year amortization to prior depreciation, despite the fact that he didn't get the deduction.

Opinions in this office are split as to whether the software is handling this correctly, and we have been unable to locate IRS documentation for one position or the other -- can anyone here help?

[Kram BergGold]

SW correct

If you have a charitable contribution in a year you do not itemize it is lost. Same with amortized points.

[j2kp0t]

This...

of course, is one of two positions being taken; what I need is documentation -- thanks though.

[Luis Mopeo]

IRC section 461(g) that says points are "treated as paid in the period to which so allocable."

The points are deducted over the life of the loan. There is no exception that says "except if the taxpayer can't itemize deductions."

[j2kp0t]

Many thanks!

Many thanks!

[jainen]

make more sense

>>"except if the taxpayer can't itemize deductions"<<

The answer makes more sense when you remember that a taxpayer can ALWAYS itemize. Sometimes the standard deduction is higher, that's all.

[jainen]

actual cost

>>If you have a charitable contribution in a year you do not itemize it is lost<<

How do you reach the conclusion that a deduction is "lost" when you take off MORE than the actual cost?

[skhyatt]

>>"except if the taxpayer can't itemize deductions"<<

The answer make more sense when you remember that a taxpayer can ALWAYS itemize. Sometimes the standard deduction is higher, that's all.

Very well said Jainen

[thomtax]

I'm glad to see you make this point. It is what I have always tried to get across to my clients. However, I must admit, even though they accept it, I can tell that they are not always convinced. My usual answer - I may personally agree with you, but my thoughts don't count. It is the rule that counts.

LT

[jerome]

Don’t assume just because charitable contribution carryovers are treated one way, the tax law is consistent. Capital loss carryovers are also a deduction. If the taxpayer does not need the carryover in one year because income is too low, the unused amount is also carried over.

Tax laws are not consistent. You need to look to a specific rule for guidance.

[Joe Btfsplk]

Don’t assume just because charitable contribution carryovers are treated one way, the tax law is consistent. Capital loss carryovers are also a deduction. If the taxpayer does not need the carryover in one year because income is too low, the unused amount is also carried over.

Tax laws are not consistent. You need to look to a specific rule for guidance.

They are not totally consistent, but in general they are. If there were an alternate deduction for the capital loss, then you would have to choose between the capital loss deduction and the alternative. In the case of contributions, there is an alternative: the standard deduction which cover contributions and all other itemized deductions.

One of the few ways to manipulate the use of the standard deduction is to itemize one year and postpone paying property tax until January, then pay again in December so you get two years property tax in a single year. This is not inconsistent--it is consistent with the cash method of accounting vs accrual.