Figure B. Are My Points Fully Deductible This Year?

Figure B. Are My Points Fully Deductible This Year?

Summary: This flowchart is used to determine if mortgage points are fully deductible for the current tax year.

Start

This is the starting of the flowchart.

Decision (1)

Is the loan secured by your main home?

If yes, continue to Decision (2)
If no, continue to Process (b)

Decision (2)

Is the payment of points an established business practice in your area?

If yes, continue to Decision (3)
If no, continue to Process (b)

Decision (3)

Were the points paid more than the amount generally charged in your area?

If yes, continue to Process (b)
If no, continue to Decision (4)

Decision (4)

Do you use the cash method of accounting?

If yes, continue to Decision (5)
If no, continue to Process (b)

Decision (5)

Were the points paid in place of amounts that ordinarily are separately stated on the settlement sheet?

If yes, continue to Process (b)
If no, continue to Decision (6)

Decision (6)

Were the funds you provided (other than those you borrowed from your lender or mortgage broker), plus any points the seller paid, at least as much as the points charged?

Footnote: The funds you provided don't have to have been applied to the points. They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose.

If yes, continue to Decision (7)
If no, continue to Process (b)

Decision (7)

Did you take out the loan to substantially improve your main home?

If yes, continue to Process (a)
If no, continue to Decision (8)

Decision (8)

Did you take out the loan to buy or build your main home?

If yes, Continue to Decision (9)
If no, continue to Process (b)

Decision (9)

Were the points figured as a percentage of the principal amount of the mortgage?

If yes, continue to Decision (10)
If no, continue to Process (b)

Decision (10)

Is the amount paid clearly shown as points on the settlement statement?

If yes, continue to Process (a)
If no, continue to Process (b)

Process (a)

You can fully deduct the points this year.

Continue to end.

Process (b)

You can't fully deduct the points this year. See the discussion on Points, earlier.

Continue To End

End

This is the ending of the flowchart.