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Posted by PaulTry on February 4, 2008, 6:42 pm
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Taxpayers purchased primary residence in 2007, paid 1%
mortgage points on a VA loan, were issued a 20% Mortgage
Credit Certificate. Points would qualify for full deduction
in 2007 but taxpayers don't have sufficient expenses to
itemize. Since IRS defines points as prepaid interest, can
the 20% credit be taken on the points amount shown in item 2
of 1098? I've found differing opinions on this on other
forums, but I can't find specific guidance in IRS pubs and
tax topics.
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Posted by Alan on February 4, 2008, 10:42 pm
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PaulTry wrote:
> Taxpayers purchased primary residence in 2007, paid 1% mortgage points
> on a VA loan, were issued a 20% Mortgage Credit Certificate. Points
> would qualify for full deduction in 2007 but taxpayers don't have
> sufficient expenses to itemize. Since IRS defines points as prepaid
> interest, can the 20% credit be taken on the points amount shown in item
> 2 of 1098? I've found differing opinions on this on other forums, but I
> can't find specific guidance in IRS pubs and tax topics.
>
They can elect to amortize the points over the term of the loan.
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Arthur Kamlet on February 7, 2008, 1:50 am
Please log in for more thread options >PaulTry wrote:
>> Taxpayers purchased primary residence in 2007, paid 1% mortgage points
>> on a VA loan, were issued a 20% Mortgage Credit Certificate. Points
>> would qualify for full deduction in 2007 but taxpayers don't have
>> sufficient expenses to itemize. Since IRS defines points as prepaid
>> interest, can the 20% credit be taken on the points amount shown in item
>> 2 of 1098? I've found differing opinions on this on other forums, but I
>> can't find specific guidance in IRS pubs and tax topics.
>>
>They can elect to amortize the points over the term of the loan.
I believe, technically, that amortizing is the default.
If they meet nine tests, which are almost always met, they
can Elect to take the full deduction in certain situations.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by PaulTry on February 7, 2008, 5:30 pm
Please log in for more thread options Arthur Kamlet wrote:
>> PaulTry wrote:
>>> Taxpayers purchased primary residence in 2007, paid 1% mortgage points
>>> on a VA loan, were issued a 20% Mortgage Credit Certificate. Points
>>> would qualify for full deduction in 2007 but taxpayers don't have
>>> sufficient expenses to itemize. Since IRS defines points as prepaid
>>> interest, can the 20% credit be taken on the points amount shown in item
>>> 2 of 1098? I've found differing opinions on this on other forums, but I
>>> can't find specific guidance in IRS pubs and tax topics.
>>>
>> They can elect to amortize the points over the term of the loan.
>
>
> I believe, technically, that amortizing is the default.
> If they meet nine tests, which are almost always met, they
> can Elect to take the full deduction in certain situations.
Yes, this is the case. They meet the tests to take the
Schedule A deduction of points in the first year, but don't
have enough other deductions to itemize. Several IRS Pubs
define points as "prepaid interest," which is the basis for
the Schedule A deduction of points. My question is, if
points are in fact considered interest, can the MCC credit,
which is computed at 20% of interest paid, be taken not only
on the 1098 Item 1 interest amount, but also on the 1098
Item 2 points amount?
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Paultry on February 10, 2008, 12:46 am
Please log in for more thread options PaulTry wrote:
> Taxpayers purchased primary residence in 2007, paid 1% mortgage points
> on a VA loan, were issued a 20% Mortgage Credit Certificate. Points
> would qualify for full deduction in 2007 but taxpayers don't have
> sufficient expenses to itemize. Since IRS defines points as prepaid
> interest, can the 20% credit be taken on the points amount shown in item
> 2 of 1098? I've found differing opinions on this on other forums, but I
> can't find specific guidance in IRS pubs and tax topics.
Here is an answer from IRS Email Tax Law Assistance:
"This issue is covered in Internal Revenue Regulations
1.25-2T(c) If these were points that were used to buy down
the interest rate, and not for other fees, they would
constitute prepaid interest, and the certified indebtedness
amount includes any and all interest. If the interest were
higher, you would have been able to take that interest. So
when you pay up front points which are not for other fees,
that interest is includable for MCC purposes."
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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