Seller Paid Part of closing Costs

[equinecpa]

I 'm doing a return a couple bought a house. There were over $10,000 in closing costs, of which points totaled approximately $5,000. The seller split the closing costs with the buyer, reported via a credit to the buyer for approx $5,000 on the settlement statement.

In this case can the buyer claim the full $5000 in points or does each line item need to be prorated?

Carolyn

[S T]

Closing Costs

The buyer can only deduct the actual points that was "charged" to his "buyer's side of the accounting of the closing statement, not a credit. All other closing costs (escrow, title, recording fees, etc.) charged to the buyers side would be added to cost basis for a personal residence. Look for the pro-ration of property taxes from date of purchase for the buyer as well.

Sandy

[GIMoe]

Points

If the seller pays points to help the buyer obtain a mortgage, the buyer is treated as having paid the points. The seller cannot deduct the points as interest. The seller reduces the amount realized on the sale of the home. The buyer deducts the points as if he or she paid the points, and then reduces the basis of the home by the amount of the seller-paid points.

The buyer can deduct all Points paid by the buyer AND the seller in the year the Points were paid provided buyer meets stipulations listed in TTB page 4-12.

[equinecpa]

Thanks much for the page reference -very much appreciated!!!

[Oxtrainer]

Seller Paid Points

Buyer claims all points and reduces basis on house by amount of seller paid points