Mortgage Points Deduction

Question

Hello,

I bought a house in 2023 and paid some points for the mortgage. I qualify to deduct all of the points in 2023 however my realtor rebates that were to be put towards closing costs was reflected in the closing statement in the points row under the column "Paid by Others".

This meant that my 1098 only reflects a small fraction of the total points. I'm aware that seller-paid points can be deducted however I can't find any guidance on the "Paid by Others" column (my closing statement has "Borrower-paid", "Seller-paid" and "Paid by Others").

So my question is, can I deduct all of the points or just the amount shown on the 1098?

Thanks!

KeriC · Answer

https://community.freetaxusa.com/discussion/comment/1368#Comment_1368

I'm assuming the difference between being able to deduct seller-paid closing costs and deducting closing costs covered by a realtor's rebate is that seller-paid closing costs would likely be considered to have increased your overall purchase price of the home, whereas a rebate wouldn't.

I welcome feedback if anyone happens to know better than me. IRS Pub 530 doesn't specifically address closing cost rebates (but it does address rebates for real estate tax, which says RE tax isn't deductible if a rebate was received).

zecarh · Answer

Hi KristineS,

Yes, this is my main residence and I do meet the tests for deductibility.

So if I have this right, if the realtor rebates were applied to the other closing costs in the closing statement, then all of the points would be deductible? The amount of the other closing costs exceeded the amount of rebates so the only difference between whether I can claim the rest of the points or not just comes down to which row(s) of the closing statement the realtor rebates were listed on?

That seems… odd since seller-paid points are deductible so I'm not sure how this is that different?

KristineS · Answer

Hi zecarh, thanks for the question.

I'll assume this is your main residence and you meet the tests for deductibility.

Points paid by others should not be included.

As a general rule, Form 1098 includes amounts paid from the borrower's (you) or seller's (current home owner) funds at settlement, and are considered paid by the borrower and allowed to be deducted. Rebates offered from your realtor are not from the borrower or seller.

IRS guidance in tax topics, publications, etc., generally state what you are allowed to claim, vs what you are not allowed to claim.