Discussion:Refinance Points
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Discussion Forum Index --> Tax Questions --> Refinance Points
| 21 February 2007 | |
| My client is amortizing 4 different refi points on his past returns (since 2002). They were not with the same lender so I would have expected them to have been written off with each new refi. Are there any issues with continuing to amortize them and not write them off? | |
| 21 February 2007 | |
| I agree, they should have been written off. Would they get money back by amending last refi year and writing them all off then? You can be a hero when you find something like this. | |
| 21 February 2007 | |
| No. It looks like all he has is SE tax for the last three years. He is doing another refi now and expects to have a lot of income this year. Can I write them all off with the 2007 refi? | |
| February 21, 2007 | |
| Legally, you can't write them off with the 2007 refinancing, since they were paid off in a prior year. If there was no tax in the year they were paid off, you should just forget it and delete the points from the current year return (if you want to stay legal, that is). | |
| 21 February 2007 | |
| personally, I don't play the audit lottery as a return preparer
my two cents | |
| 21 February 2007 | |
| DZ, we are prohibited from making written advice (written advice other than a covered opinion) that plays audit roulette - See Circular 230 section 10.37 [10.37]. You probably meant that as a joke, right? | |
| February 21, 2007 | |
| I don't think he was joking, Kevin. I agree with you and Glmpllc. I would delete the points from the return. It doesn't matter to me that the chance of an audit is less than 1/2 of one percent. I value my profession too much and try to do things right the first time. | |
Death&Taxes (talk|edits) said: | 21 February 2007 |
| If he paid no tax, he lost nothing by the failure. I would remove them also, except for any set he made have paid off this year. | |
Kytaxpreparer (talk|edits) said: | 22 February 2007 |
| I have had several clients in pass who paid points on their personal residence loans(home mortgage). They were always listed on form 1098 box 2. When I entered that info in program, it always includes it in the total mortgage interest paid (sched A). Granted these were always small amounts-under $2000. Should those have been amortized as discussed earlier?? As well, I always get those people who have refinanced and bring in all the paperwork because the mortgage co. said everthing is deductible (ex. fees, closing cost, etc.) The only thing I know of to use is county/city taxes that are prorated. Am I missing anything?? :) | |
| 22 February 2007 | |
| If these weren't acquisition points, but refi points, they should have been amortized. The closing fees and tax stamps and filing costs and attorney fees are not deductible, but add to basis, of a residence. | |
| February 22, 2007 | |
| Refinancing points are deducted over the life of the loan, beginning on the date refinanced. When the loan is paid off or refinanced, the balance of the points are deducted in that year. Refinancing points are usually not listed on Form 1098, but sometimes, they are.
Points paid when a new house is purchased are deductible in the year of purchase. Points can be found on the closing statement and are called loan discount fees, loan origination fees, or points, and will usually indicate a percentage of the loan. | |
Death&Taxes (talk|edits) said: | 22 February 2007 |
| You are not missing anything....mortgage companies and realtors always set us up to be the bad guys. The points on a Re-Fi are amortized generally; only when additional money is borrowed and added to basis of the house [acquisition debt] can part of them be written off. To those clients who whine, tell them that they will probably be refinancing in a year or two and get the rest of the points then!
One trick on a HUD-1 I have learned: if the lender is a temporary financing company and the mortgage is then taken over, make sure the interest paid at settlement throuugh the end of the month is included in a 1098. Often if less than $600, and the recipient is "Easy Lenders" which then sells the debt to Chase or someone, no 1098 is issued. How do you tell? Get the rate and term, reduce it to a monthly factor, do a quick and dirty computation on the first month's interest and multiply by the number of payments that year. e.g. 200,000 @ 6% would be $1000 for the first month; if the first month payment is Sept 1st, and the 1098 shows interest of slightly less than $4000, the interest paid at settlement is probably not included. If the property were bought on July 15th, you might miss $500 of interest. Remember, on a settlement in July the first payment is not due until September 1st and is paying the August interest. | |
| 27 February 2007 | |
| Hi Death&Taxes,
Actually, I do the books and 1098's for one of those "Easy Lenders", and they are also required to cut 1098's. I did them just last month for him. The borrower should get two 1098's when all is said and done. | |
| 27 February 2007 | |
| BKPTax,
I almost forgot: Can't you just re-file the old one and bring the NOL to 2007? | |
