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.
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