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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
You can't deduct these amounts as points ei- Example. Dan paid $3,000 in points in Refunded interest. If you received a refund of
ther in the year paid or over the life of the mort- 2011 that he had to spread out over the 15-year mortgage interest you overpaid in an earlier
gage. life of the mortgage. He deducts $200 points year, you will generally receive a Form 1098
per year. Through 2022, Dan has deducted showing the refund in box 4. See Refunds of in-
Points paid by the seller. The term “points” $2,200 of the points. terest, earlier.
includes loan placement fees that the seller Dan prepaid his mortgage in full in 2022. He
pays to the lender to arrange financing for the can deduct the remaining $800 of points in Mortgage insurance premiums. The
buyer. 2022. amount of mortgage insurance premiums you
paid during 2022 should be shown in box 5 of
Treatment by seller. The seller can't de- Limits on deduction. You can't fully deduct Form 1098.
duct these fees as interest. But they are a sell- points paid on a mortgage that exceeds the lim-
ing expense that reduces the amount realized its discussed in Part II. See the Table 1 Instruc-
by the seller. See Pub. 523 for information on tions, later, for line 13. How To Report
selling your home.
Treatment by buyer. The buyer reduces Form 1098. The mortgage interest statement Generally, you can deduct the home mortgage
the basis of the home by the amount of the you receive should show not only the total inter- interest and points reported to you on Form
seller-paid points and treats the points as if he est paid during the year, but also your mortgage 1098 on Schedule A (Form 1040), line 8a. How-
or she had paid them. If all the tests under De- insurance premiums and deductible points paid ever, any interest showing in box 1 of Form
duction Allowed in Year Paid, earlier, are met, during the year. See Form 1098, Mortgage In- 1098 from a home equity loan, or a line of credit
the buyer can deduct the points in the year terest Statement, later. or credit card loan secured by the property, is
not deductible if the proceeds were not used to
paid. If any of those tests aren't met, the buyer buy, build, or substantially improve a qualified
deducts the points over the life of the loan. Form 1098, Mortgage home. If you paid more deductible interest to
If you need information about the basis of the financial institution than the amount shown
your home, see Pub. 523 or Pub. 530. Interest Statement
on Form 1098, show the portion of the deducti-
Funds provided are less than points. If you If you paid $600 or more of mortgage interest ble interest that was omitted from Form 1098 on
meet all the tests in Deduction Allowed in Year (including certain points) during the year on any line 8b. Attach a statement to your paper return
Paid, earlier, except that the funds you provided one mortgage, you will generally receive a Form explaining the difference and print “See at-
were less than the points charged to you (test 6, 1098 or a similar statement from the mortgage tached” next to line 8b.
earlier), you can deduct the points in the year holder. You will receive the statement if you pay Deduct home mortgage interest that wasn't
paid, up to the amount of funds you provided. In interest to a person (including a financial institu- reported to you on Form 1098 on Schedule A
addition, you can deduct any points paid by the tion or cooperative housing corporation) in the (Form 1040), line 8b. If you paid home mort-
seller. course of that person's trade or business. A gage interest to the person from whom you
governmental unit is a person for purposes of bought your home, show that person's name,
Example 1. When you took out a $100,000 furnishing the statement. address, and taxpayer identification number
mortgage loan to buy your home in December, (TIN) on the dotted lines next to line 8b. The
you were charged one point ($1,000). You meet The statement for each year should be sent seller must give you this number and you must
all the tests for deducting points in the year to you by January 31 of the following year. A give the seller your TIN. A Form W-9, Request
paid, except the only funds you provided were a copy of this form will also be sent to the IRS. for Taxpayer Identification Number and Certifi-
cation, can be used for this purpose. Failure to
$750 down payment. Of the $1,000 charged for The statement will show the total interest meet any of these requirements may result in a
points, you can deduct $750 in the year paid. you paid during the year, any mortgage insur- $50 penalty for each failure. The TIN can be ei-
You spread the remaining $250 over the life of ance premiums you paid, and if you purchased ther a social security number, an individual tax-
the mortgage. a principal residence during the year, it will also payer identification number (issued by the IRS),
Example 2. The facts are the same as in show the points paid during the year, including or an employer identification number (EIN).
Example 1, except that the person who sold you seller-paid points, that are deductible as inter-
your home also paid one point ($1,000) to help est to the extent you do not exceed the home If you can take a deduction for points that
you get your mortgage. In the year paid, you acquisition debt limit. See Part II. Limits on weren’t reported to you on Form 1098, deduct
can deduct $1,750 ($750 of the amount you Home Mortgage Interest Deduction, later. How- those points on Schedule A (Form 1040),
were charged plus the $1,000 paid by the ever, the statement shouldn't show any interest line 8c.
seller). You spread the remaining $250 over the that was paid for you by a government agency.
More than one borrower. If you and at least
life of the mortgage. You must reduce the basis As a general rule, Form 1098 will include one other person (other than your spouse if you
of your home by the $1,000 paid by the seller. only points that you can fully deduct in the year file a joint return) were liable for and paid inter-
paid. However, it may report points that you est on a mortgage that was for your home, and
Excess points. If you meet all the tests in De- can't deduct, particularly if you are filing married the other person received a Form 1098 showing
duction Allowed in Year Paid, earlier, except filing separately or have mortgages for multiple the interest that was paid during the year, at-
that the points paid were more than generally properties. You must take care to deduct only tach a statement to your paper return explaining
paid in your area (test 3), you deduct in the year those points legally allowable. Additionally, cer- this. Show how much of the interest each of you
paid only the points that are generally charged. tain points not included on Form 1098 may also paid, and give the name and address of the per-
You must spread any additional points over the be deductible, either in the year paid or over the son who received the form. Deduct your share
life of the mortgage. life of the loan. See the earlier discussion of of the interest on Schedule A (Form 1040),
Mortgage ending early. If you spread your Points to determine whether you can deduct line 8b, and print “See attached” next to the line.
deduction for points over the life of the mort- points not shown on Form 1098. Similarly, if you're the payer of record on a
mortgage on which there are other borrowers
gage, you can deduct any remaining balance in Prepaid interest on Form 1098. If you pre- entitled to a deduction for the interest shown on
the year the mortgage ends. However, if you re- paid interest in 2022 that accrued in full by Jan- the Form 1098 you received, deduct only your
finance the mortgage with the same lender, you uary 15, 2023, this prepaid interest may be in- share of the interest on Schedule A (Form
can't deduct any remaining balance of spread cluded in box 1 of Form 1098. However, you 1040), line 8a. Let each of the other borrowers
points. Instead, deduct the remaining balance can't deduct the prepaid amount for January know what their share is.
over the term of the new loan. 2023 in 2022. (See Prepaid interest, earlier.)
A mortgage may end early due to a prepay- You will have to figure the interest that accrued Mortgage proceeds used for business or in-
ment, refinancing, foreclosure, or similar event. for 2023 and subtract it from the amount in vestment. If your home mortgage interest de-
box 1. You will include the interest for January duction is limited under the rules explained in
2023 with other interest you pay for 2023. Part II, but all or part of the mortgage proceeds
Page 8 Publication 936 (2022)
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