Publication 530 - Tax Information For Homeowners

Points paid by the seller. The term “points”

Form 1098. The mortgage interest statement

Refund of overpaid interest. If you receive a

includes loan placement fees that the seller

you receive should show not only the total inter-

refund of mortgage interest you overpaid in a

pays to the lender to arrange financing for the

est paid during the year, but also your deductible

prior year, you generally will receive a Form

points paid during the year. See Mortgage Inter-

buyer.

1098 showing the refund in box 3. Generally,

est Statement, later.

you must include the refund in income in the

Treatment by seller. The seller cannot de-

year you receive it. See Refund of home mort-

duct these fees as interest; but, they are a sell-

gage interest, earlier, under Home Mortgage

ing expense that reduces the seller’s amount

Where To Deduct

Interest.

realized. See Publication 523 for more informa-

Home Mortgage Interest

tion.

More than one borrower. If you and at least

Enter on Schedule A (Form 1040), line 10, the

Treatment by buyer. The buyer treats

one other person (other than your spouse if you

home mortgage interest and points reported to

seller-paid points as if he or she had paid them.

file a joint return) were liable for and paid interest

you on Form 1098 (discussed next). If you did

If all the tests listed earlier under Exception are

on a mortgage that was for your home, and the

not receive a Form 1098, enter your deductible

met, the buyer can deduct the points in the year

other person received a Form 1098 showing the

interest on line 11, and any deductible points on

paid. If any of those tests are not met, the buyer

line 12. See Table 1 for a summary of where to

interest that was paid during the year, attach a

must deduct the points over the life of the loan.

deduct home mortgage interest and real estate

statement to your return explaining this. Show

The buyer must also reduce the basis of the

taxes.

how much of the interest each of you paid, and

home by the amount of the seller-paid points.

give the name and address of the person who

If you paid home mortgage interest to the

For more information about the basis of your

received the form. Deduct your share of the

person from whom you bought your home, show

home, see Basis, later.

that person’s name, address, and social security

interest on Schedule A (Form 1040), line 11, and

number (SSN) or employer identification num-

write “See attached” to the right of that line.

Funds provided are less than points. If you

ber (EIN) on the dotted lines next to line 11. The

meet all the tests listed earlier under Exception

Mortgage Insurance

seller must give you this number and you must

except that the funds you provided were less

give the seller your SSN. Form W-9, Request for

Premiums

than the points charged to you (test 6), you can

Taxpayer Identification Number and Certifica-

deduct the points in the year paid up to the

tion, can be used for this purpose. Failure to

You can take an itemized deduction on Sched-

amount of funds you provided. In addition, you

meet either of these requirements may result in

can deduct any points paid by the seller.

ule A (Form 1040), line 13, for premiums you

a $50 penalty for each failure.

pay or accrue during 2008 for qualified mort-

Example 1. When you took out a $100,000

gage insurance in connection with home acqui-

mortgage loan to buy your home in December,

sition debt on your qualified home.

Mortgage Interest Statement

you were charged one point ($1,000). You meet

Mortgage insurance premiums you paid or

all the tests for deducting points in the year paid

If you paid $600 or more of mortgage interest

accrued on any mortgage insurance contract

(see Exception, earlier), except the only funds

(including certain points and mortgage insur-

issued before January 1, 2007, are not deducti-

you provided were a $750 down payment. Of the

ance premiums) during the year on any one

ble as an itemized deduction.

$1,000 you were charged for points, you can

mortgage to a mortgage holder in the course of

deduct $750 in the year paid. You spread the

that holder’s trade or business, you should re-

remaining $250 over the life of the mortgage.

Qualified Mortgage Insurance

ceive a Form 1098 or similar statement from the

mortgage holder. The statement will show the

Example 2. The facts are the same as in

Qualified mortgage insurance is mortgage insur-

total interest paid on your mortgage during the

Example 1, except that the person who sold you

year. If you bought a main home during the year,

ance provided by the Veterans Administration,

your home also paid one point ($1,000) to help

it also will show the deductible points you paid

the Federal Housing Administration, or the Rural

you get your mortgage. In the year paid, you can

and any points you can deduct that were paid by

Housing Administration, and private mortgage

deduct $1,750 ($750 of the amount you were

the person who sold you your home. See Points,

insurance (as defined in section 2 of the Home-

charged plus the $1,000 paid by the seller). You

earlier.

owners Protection Act of 1998 as in effect on

spread the remaining $250 over the life of the

December 20, 2006).

The interest you paid at settlement should be

mortgage. You must reduce the basis of your

included on the statement. If it is not, add the

home by the $1,000 paid by the seller.

Special rules for prepaid mortgage insur-

interest from the settlement sheet that qualifies

as home mortgage interest to the total shown on

ance. If you paid premiums for qualified mort-

Excess points. If you meet all the tests under

Form 1098 or similar statement. Put the total on

gage insurance that are properly allocable to

Exception except that the points paid were more

Schedule A (Form 1040), line 10, and attach a

periods after the close of the taxable year, such

than are generally charged in your area (test 3),

statement to your return explaining the differ-

premiums are treated as paid in the period to

you can deduct in the year paid only the points

ence. Write “See attached” to the right of line 10.

which they are allocated. No deduction is al-

that are generally charged. You must spread

A mortgage holder can be a financial institu-

lowed for the unamortized balance if the mort-

any additional points over the life of the mort-

tion, a governmental unit, or a cooperative hous-

gage is satisfied before its term. The two

gage.

ing corporation. If a statement comes from a

preceding sentences do not apply to qualified

cooperative housing corporation, it generally will

mortgage insurance provided by the Depart-

Mortgage ending early. If you spread your

show your share of interest.

ment of Veterans Affairs or Rural Housing Serv-

deduction for points over the life of the mort-

Your mortgage interest statement for 2008

ice.

gage, you can deduct any remaining balance in

should be provided or sent to you by January 31,

At the time this publication went to print,

the year the mortgage ends. A mortgage may

2009. If it is mailed, you should allow adequate

regulations were being considered that would

end early due to a prepayment, refinancing,

time to receive it before contacting the mortgage

foreclosure, or similar event.

allow you to allocate qualified mortgage insur-

holder. A copy of this form will be sent to the IRS

ance premiums paid in connection with a mort-

also.

Example. Dan paid $3,000 in points in 2001

gage obtained after 2006 over the shorter of the

that he had to spread out over the 15-year life of

stated term of the mortgage or 84 months, be-

Example. You bought a new home on May

the mortgage. He had deducted $1,400 of these

ginning with the month the insurance was ob-

3. You paid no points on the purchase. During

points through 2007.

tained.

the year, you made mortgage payments which

Dan prepaid his mortgage in full in 2008. He

More information can be found in Publication

included $4,480 deductible interest on your new

can deduct the remaining $1,600 of points in

553, Highlights of the 2008 Tax Changes which

home. The settlement sheet for the purchase of

2008.

is available at Informa-

the home included interest of $620 for 29 days in

tion on this and other changes affecting individ-

Exception. If you refinance the mortgage

May. The mortgage statement you receive from

ual taxpayers can also be found at

with the same lender, you cannot deduct any

the lender includes total interest of $5,100

formspubs. Click on Highlights of Recent Tax

remaining points for the year. Instead, deduct

($4,480 + $620). You can deduct the $5,100 if

them over the term of the new loan.

you itemize your deductions.

Changes and then on Individuals.

Page 6

Publication 530 (2008)

Publication 530 - Tax Information For Homeowners - 2008 Page 6

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