Tuesday, December 9, 2014

An Important Tax Point About Points



If you bought a rental property this year, the most common deductions you’ll have include mortgage interest, real estate taxes, and insurance. Mortgage points, however, are treated somewhat differently.

Points are also known as loan origination fees or premium charges. Each point is 1% of the loan amount. It’s a sneaky way of charging you upfront interest on your mortgage. You would think that since you’ve paid this interest you could deduct it in the year paid. Not so …

You must deduct points over the length of the loan. Your CPA should know how to calculate this. I use TurboTax, which will amortize the expense each year for you.  

IRS Publication 527, pages 4 and 5 offer further explanation.

No comments:

Post a Comment