by the seller. See Pub. 523 for information on
selling your home.
Treatment by buyer. The buyer reduces
the basis of the home by the amount of the
seller-paid points and treats the points as if he
or she had paid them. If all the tests under De-
duction Allowed in Year Paid, earlier, are met,
the buyer can deduct the points in the year
paid. If any of those tests aren't met, the buyer
deducts the points over the life of the loan.
If you need information about the basis of
your home, see Pub. 523 or Pub. 530.
Funds provided are less than points. If you
meet all the tests in Deduction Allowed in Year
Paid, earlier, except that the funds you provided
were less than the points charged to you (test
(6)), you can deduct the points in the year paid,
up to the amount of funds you provided. In addi-
tion, you can deduct any points paid by the
seller.
Example 1. When you took out a $100,000
mortgage loan to buy your home in December,
you were charged one point ($1,000). You meet
all the tests for deducting points in the year
paid, except the only funds you provided were a
$750 down payment. Of the $1,000 charged for
points, you can deduct $750 in the year paid.
You spread the remaining $250 over the life of
the mortgage.
Example 2. The facts are the same as in
Example 1, except that the person who sold you
your home also paid one point ($1,000) to help
you get your mortgage. In the year paid, you
can deduct $1,750 ($750 of the amount you
were charged plus the $1,000 paid by the
seller). You spread the remaining $250 over the
life of the mortgage. You must reduce the basis
of your home by the $1,000 paid by the seller.
Excess points. If you meet all the tests in De-
duction Allowed in Year Paid, earlier, except
that the points paid were more than generally
paid in your area (test (3)), you deduct in the
year paid only the points that are generally
charged. You must spread any additional points
over the life of the mortgage.
Mortgage ending early. If you spread your
deduction for points over the life of the mort-
gage, you can deduct any remaining balance in
the year the mortgage ends. However, if you re-
finance the mortgage with the same lender, you
can't deduct any remaining balance of spread
points. Instead, deduct the remaining balance
over the term of the new loan.
A mortgage may end early due to a prepay-
ment, refinancing, foreclosure, or similar event.
Example. Dan paid $3,000 in points in
2007 that he had to spread out over the 15-year
life of the mortgage. He deducts $200 points
per year. Through 2018, Dan has deducted
$2,200 of the points.
Dan prepaid his mortgage in full in 2018. He
can deduct the remaining $800 of points in
2018.
Limits on deduction. You can't fully deduct
points paid on a mortgage that exceeds the lim-
its discussed in Part II. See the Table 1 Instruc-
tions, later, for line 13.
Form 1098. The mortgage interest statement
you receive should show not only the total inter-
est paid during the year, but also your deducti-
ble points paid during the year. See Form 1098,
Mortgage Interest Statement next.
Form 1098, Mortgage
Interest Statement
If you paid $600 or more of mortgage interest
(including certain points) during the year on any
one mortgage, you generally will receive a Form
1098 or a similar statement from the mortgage
holder. You will receive the statement if you pay
interest to a person (including a financial institu-
tion or cooperative housing corporation) in the
course of that person's trade or business. A
governmental unit is a person for purposes of
furnishing the statement.
The statement for each year should be sent
to you by January 31 of the following year. A
copy of this form will also be sent to the IRS.
The statement will show the total interest
you paid during the year, and if you purchased
a principal residence during the year, it also will
show the points paid during the year, including
seller-paid points, that are deductible as inter-
est to the extent you do not exceed the home
acquisition debt limit. See
Part II, Limits on
Home Mortgage Interest Deduction, later. How-
ever, the statement shouldn't show any interest
that was paid for you by a government agency.
As a general rule, Form 1098 will include
only points that you can fully deduct in the year
paid. However, it may report points that you
can't deduct, particularly if you are filing married
filing separately or have mortgages for multiple
properties. You must take care to deduct only
those points legally allowable. Additionally, cer-
tain points not included on Form 1098 also may
be deductible, either in the year paid or over the
life of the loan. See the earlier discussion of
Points to determine whether you can deduct
points not shown on Form 1098.
Prepaid interest on Form 1098. If you pre-
paid interest in 2018 that accrued in full by Jan-
uary 15, 2019, this prepaid interest may be in-
cluded in box 1 of Form 1098. However, you
can't deduct the prepaid amount for January
2019 in 2018. (See Prepaid interest, earlier.)
You will have to figure the interest that accrued
for 2019 and subtract it from the amount in
box 1. You will include the interest for January
2019 with other interest you pay for 2019.
Refunded interest. If you received a refund of
mortgage interest you overpaid in an earlier
year, you generally will receive a Form 1098
showing the refund in box 4. See Refunds of in-
terest, earlier.
How To Report
Generally, you can deduct the home mortgage
interest and points reported to you on Form
1098 on Schedule A (Form 1040), line 8a. How-
ever, any interest showing in box 1 of Form
1098 from a home equity loan, or a line of credit
or credit card loan secured by the property is
not deductible if the proceeds were not used to
buy, build, or substantially improve a qualified
home. If you paid more deductible interest to
the financial institution than the amount shown
on Form 1098, show the portion of the deducti-
ble interest that was omitted from Form 1098 on
line 8b. Attach a statement to your paper return
explaining the difference and print “See at-
tached” next to line 8b.
Deduct home mortgage interest that wasn't
reported to you on Form 1098 on Schedule A
(Form 1040), line 8b. If you paid home mort-
gage interest to the person from whom you
bought your home, show that person's name,
address, and taxpayer identification number
(TIN) on the dotted lines next to line 8b. The
seller must give you this number and you must
give the seller your TIN. A Form W-9, Request
for Taxpayer Identification Number and Certifi-
cation, can be used for this purpose. Failure to
meet any of these requirements may result in a
$50 penalty for each failure. The TIN can be ei-
ther a social security number, an individual tax-
payer identification number (issued by the IRS),
or an employer identification number.
If you can take a deduction for points that
weren’t reported to you on Form 1098, deduct
those points on Schedule A (Form 1040),
line 8c.
More than one borrower. If you and at least
one other person (other than your spouse if you
file a joint return) were liable for and paid inter-
est on a mortgage that was for your home, and
the other person received a Form 1098 showing
the interest that was paid during the year, at-
tach a statement to your paper return explaining
this. Show how much of the interest each of you
paid, and give the name and address of the per-
son who received the form. Deduct your share
of the interest on Schedule A (Form 1040),
line 8b, and print “See attached” next to the line.
Similarly, if you're the payer of record on a
mortgage on which there are other borrowers
entitled to a deduction for the interest shown on
the Form 1098 you received, deduct only your
share of the interest on Schedule A (Form
1040), line 8a. Let each of the other borrowers
know what his or her share is.
Mortgage proceeds used for business or in-
vestment. If your home mortgage interest de-
duction is limited under the rules explained in
Part II, but all or part of the mortgage proceeds
were used for business, investment, or other
deductible activities, see Table 2 near the end
of this publication. It shows where to deduct the
part of your excess interest that is for those ac-
tivities. The Table 1 Instructions for line 16 in
Part II explain how to divide the excess interest
among the activities for which the mortgage
proceeds were used.
Special Rule for
Tenant-Stockholders in
Cooperative Housing
Corporations
A qualified home includes stock in a coopera-
tive housing corporation owned by a ten-
ant-stockholder. This applies only if the ten-
ant-stockholder is entitled to live in the house or
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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
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