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Don't Overlook The Tax Break Given for Mortgage Points
By: First Weber, Inc.
Homeowners already know the major tax advantage available by deducting mortgage interest payments. But many homeowners overlook another home loan tax break: the deduction for points paid to get their home loans. In some cases, the points also could cut tax bills for folks who refinanced or got an equity loan or line of credit.
Each point is 1 percent of the loan amount. Lenders charge points as a way to make a profit, and borrowers generally pay points in exchange for lower mortgage rates. If you paid points, the amount should be listed on the 1098 statement from your lender. This document also notes how much mortgage interest you paid. Both of these deductible amounts go on line 10 of Schedule A. (If the points aren't on that statement but show up elsewhere—for example, on your closing documents, enter them on line 12. Check the Schedule A instructions for details.)
Getting the Maximum Deduction
On a conventional mortgage (usually a fixed-rate, 30-year loan that is not insured by a federal agency), points may be paid by either buyer or seller or split between them. Even if the seller pays all the points, the buyer gets the deduction. Exactly how much of one and when depends on the loan circumstances. Loan points are fully deductible in the year paid if they meet all the necessary requirements. Requirements may be obtained from your mortgage lender.
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