Publication 530 - Tax Information For First-Time Homeowners

The buyer must also reduce the basis of the

If you paid home mortgage interest to the

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

home by the amount of the seller-paid points.

person from whom you bought your home, show

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

For more information about the basis of your

that person’s name, address, and social security

Mortgage Insurance

home, see Basis, later.

number (SSN) or employer identification num-

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

Premiums

Funds provided are less than points. If you

seller must give you this number and you must

meet all the tests listed earlier under Exception

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

You can take an itemized deduction on line 13,

except that the funds you provided were less

Taxpayer Identification Number and Certifica-

Schedule A (Form 1040), for premiums you pay

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

tion, can be used for this purpose. Failure to

or accrue during 2007 for qualified mortgage

deduct the points in the year paid up to the

meet either of these requirements may result in

insurance in connection with home acquisition

amount of funds you provided. In addition, you

a $50 penalty for each failure.

debt on your qualified home.

can deduct any points paid by the seller.

Mortgage insurance premiums you paid or

accrued on any mortgage insurance contract

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

Mortgage Interest Statement

issued before January 1, 2007, are not deducti-

mortgage loan to buy your home in December,

ble as an itemized deduction. Mortgage insur-

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

If you paid $600 or more of mortgage interest

ance premiums you paid or accrued after

all the tests for deducting points in the year paid

(including certain points and mortgage insur-

December 31, 2007, or that are properly alloca-

(see Exception, earlier), except the only funds

ance premiums) during the year on any one

ble to any period after December 31, 2007, are

you provided were a $750 down payment. Of the

mortgage to a mortgage holder in the course of

not deductible as an itemized deduction.

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

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

deduct $750 in the year paid. You spread the

ceive a Form 1098 or similar statement from the

remaining $250 over the life of the mortgage.

mortgage holder. The statement will show the

Qualified Mortgage Insurance

total interest paid on your mortgage during the

Example 2. The facts are the same as in

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

Qualified mortgage insurance is mortgage insur-

Example 1, except that the person who sold you

it also will show the deductible points you paid

ance provided by the Veterans Administration,

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

and any points you can deduct that were paid by

the Federal Housing Administration, or the Rural

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

the person who sold you your home. See Points,

Housing Administration, and private mortgage

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

earlier.

insurance (as defined in section 2 of the Home-

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

The interest you paid at settlement should be

owners Protection Act of 1998 as in effect on

spread the remaining $250 over the life of the

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

December 20, 2006).

mortgage. You must reduce the basis of your

interest from the settlement sheet that qualifies

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

Special rules for prepaid mortgage insur-

as home mortgage interest to the total shown on

ance. If you paid premiums for qualified mort-

Form 1098 or similar statement. Put the total on

Excess points. If you meet all the tests under

gage insurance that are properly allocable to

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

Exception except that the points paid were more

periods after the close of the taxable year, such

statement to your return explaining the differ-

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

premiums are treated as paid in the period to

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

you can deduct in the year paid only the points

which they are allocated. No deduction is al-

A mortgage holder can be a financial institu-

that are generally charged. You must spread

lowed for the unamortized balance if the mort-

tion, a governmental unit, or a cooperative hous-

any additional points over the life of the mort-

gage is satisfied before its term. The two

ing corporation. If a statement comes from a

gage.

preceding sentences do not apply to qualified

cooperative housing corporation, it generally will

mortgage insurance provided by the Depart-

show your share of interest.

Mortgage ending early. If you spread your

ment of Veterans Affairs or Rural Housing Serv-

Your mortgage interest statement for 2007

deduction for points over the life of the mort-

ice.

should be provided or sent to you by January 31,

gage, you can deduct any remaining balance in

2008. If it is mailed, you should allow adequate

the year the mortgage ends. A mortgage may

time to receive it before contacting the mortgage

end early due to a prepayment, refinancing,

Home Acquisition Debt

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

foreclosure, or similar event.

also.

Home acquisition debt is a mortgage you took

Example. Dan paid $3,000 in points in 2000

out after October 13, 1987, to buy, build, or

Example. You bought a new home on May

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

substantially improve a qualified home. It also

3. You paid no points on the purchase. During

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

must be secured by that home.

the year, you made mortgage payments which

points through 2006.

If the amount of your mortgage is more than

included $4,480 deductible interest on your new

Dan prepaid his mortgage in full in 2007. He

the cost of the home plus the cost of any sub-

home. The settlement sheet for the purchase of

can deduct the remaining $1,600 of points in

stantial improvements, only the debt that is not

the home included interest of $620 for 29 days in

2007.

more than the cost of the home plus improve-

May. The mortgage statement you receive from

ments qualifies as home acquisition debt.

Exception. If you refinance the mortgage

the lender includes total interest of $5,100

with the same lender, you cannot deduct any

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

Home acquisition debt limit. The total

remaining points for the year. Instead, deduct

you itemize your deductions.

amount you can treat as home acquisition debt

them over the term of the new loan.

at any time on your home cannot be more than

Refund of overpaid interest. If you receive a

$1 million ($500,000 if married filing separately).

Form 1098. The mortgage interest statement

refund of mortgage interest you overpaid in a

you receive should show not only the total inter-

prior year, you generally will receive a Form

est paid during the year, but also your deductible

1098 showing the refund in box 3. Generally,

Qualified Home

points paid during the year. See Mortgage Inter-

you must include the refund in income in the

est Statement, later.

year you receive it. See Refund of home mort-

This means your main home or your second

gage interest, earlier, under Home Mortgage

home. A home includes a house, condominium,

Interest.

cooperative, mobile home, house trailer, boat, or

Where To Deduct

similar property that has sleeping, cooking, and

More than one borrower. If you and at least

Home Mortgage Interest

toilet facilities.

one other person (other than your spouse if you

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

file a joint return) were liable for and paid interest

Main home. You can have only one main

home mortgage interest and points reported to

on a mortgage that was for your home, and the

home at any one time. This is the home where

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

other person received a Form 1098 showing the

you ordinarily live most of the time.

not receive a Form 1098, enter your deductible

interest that was paid during the year, attach a

interest on line 11, and any deductible points on

statement to your return explaining this. Show

Second home and other special situations.

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

how much of the interest each of you paid, and

If you have a second home, use part of your

deduct home mortgage interest and real estate

give the name and address of the person who

home for other than residential living (such as a

taxes.

received the form. Deduct your share of the

home office), rent out part of your home, or are

Page 6

Publication 530 (2007)

Publication 530 - Tax Information For First-Time Homeowners - 2007 Page 6

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