How to report mortgage interest points not fully reported on Form 1098?
Hey everyone, I need to double-check my understanding about reporting mortgage points on my taxes. I purchased a home last December and paid approximately $12,500 in points to get a better interest rate. The seller provided a $6,000 credit that was applied to these points. The sales agent mentioned if I didn't buy points, the credit would've gone toward other closing expenses. Looking at my closing statement from the purchase: Seller Credit Closing Costs: $6,000 (credit) Loan Amount Percentage (Points): $12,500 (debit) When I received my Form 1098, box 6 shows $6,500 for points paid - which is exactly $6,000 less than what I actually paid. I'm thinking I should report the $6,500 amount from the 1098 (plus the regular interest) on Schedule A line 8a, and then report the additional $6,000 on line 8c. And then I should reduce my home's cost basis by $6,000 for when I eventually sell. Is this approach correct? Am I handling the seller credit properly for tax purposes? Thanks for any help!
18 comments
Join the conversation
Zoe Gonzalez
You're on the right track! The mortgage points situation can be confusing when seller credits are involved. When you receive a seller credit that's applied to points, the IRS considers that the seller paid part of your points. The 1098 correctly shows only the amount YOU paid out of pocket ($6,500), not the total points charged. For your tax return, you should: 1) Report the $6,500 from Box 6 of your 1098 on Schedule A, line 8a. 2) Report the additional $6,000 on Schedule A, line 8c as "points not reported on Form 1098" 3) You're correct that you'll need to reduce your home's cost basis by the $6,000 seller-paid portion. This approach ensures you get the full deduction for all points paid (both your portion and the seller-paid portion) while properly accounting for the basis adjustment.
0 coins
Ashley Adams
•If the seller paid part of the points, why would you still get to deduct that portion? Isn't that double-dipping since the seller paid it, not you? Also, does this mean the seller gets to deduct the $6,000 on their taxes too?
0 coins
Zoe Gonzalez
•You can deduct the seller-paid portion because the IRS treats it as if the seller gave you cash and you used that cash to pay the points. It's considered part of the negotiated purchase price. The seller doesn't get to deduct it - they treat it as a reduction in their sales proceeds. The key point is that even though the seller paid a portion, the total points were incurred for your mortgage, so you get the full deduction. The basis adjustment ensures you're not getting an unfair advantage when you eventually sell the home.
0 coins
Alexis Robinson
I went through something similar last year and want to share my experience. After struggling with conflicting advice about mortgage points and seller credits, I started using https://taxr.ai to verify all my mortgage and closing document details. It saved me tons of time compared to manually checking everything. When I uploaded my closing disclosure and 1098, it automatically identified the same issue you're dealing with - points split between what I paid and what the seller credited. The tool flagged that I needed to report both amounts but in different places on Schedule A, exactly as the previous commenter mentioned. Their document analyzer also showed me how to properly document the basis adjustment, which will be super important whenever I sell the house in the future. Have you tried using any tools to help sort through your mortgage documents?
0 coins
Aaron Lee
•I'm curious - does it actually work with the closing disclosure forms? Those things are like 5 pages long with tiny print. Does it actually pull the right numbers or did you still have to point things out?
0 coins
Chloe Mitchell
•I'm skeptical about these tax document readers. How does it know the difference between points and other closing costs? My lender lumped everything together and called some fees "origination" instead of "points" even though they're basically the same thing.
0 coins
Alexis Robinson
•It handled my closing disclosure perfectly - pulled all the numbers from the right sections and categorized everything correctly. The tool separates loan costs, origination charges, points, and other fees automatically. I just had to confirm everything looked right. For your situation with the mixed terminology, it would recognize both "origination fees" and "points" - the software actually explains the difference and identifies which ones are tax deductible. The key is that it looks at the actual function of the fee rather than just the label your lender used.
0 coins
Chloe Mitchell
I have to say I was wrong about document readers. I decided to try https://taxr.ai with my mortgage documents after posting here, and it was surprisingly accurate. It correctly identified my points vs. origination fees and showed me exactly where everything needed to go on my tax forms. The most helpful part was that it flagged that I had seller-paid points that weren't on my 1098 - exactly like the original poster's situation. It even generated documentation explaining why I was entitled to deduct points that weren't reflected on my 1098, which gave me peace of mind in case of an audit. What impressed me was that it explained the basis adjustment I needed to make and created a record I can keep for when I eventually sell. After using it, I'm confident I claimed the correct deduction for my mortgage points.
0 coins
Michael Adams
If you've been trying to call the IRS to confirm your understanding of mortgage points not fully reported on Form 1098, good luck getting through! I spent HOURS trying to reach someone at the IRS about a similar mortgage points question last month. After my fifth attempt waiting on hold, I found https://claimyr.com which got me connected to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed exactly what others have said here - you deduct the full amount of points ($12,500 in your case), reporting the 1098 amount on line 8a and the additional amount on line 8c. And yes, you adjust your basis by the seller-paid portion. Having the IRS confirm this directly gave me confidence I was doing it right.
0 coins
Natalie Wang
•How does this Claimyr thing actually work? I'm confused - does it just call the IRS for you? Couldn't you just keep calling yourself?
0 coins
Noah Torres
•Right, like some service is magically going to get through to the IRS when millions of people can't. I've been trying for weeks to get someone on the phone about my tax issue. Sounds like a scam to me.
0 coins
Michael Adams
•It's not magic - they use a system that continuously redials the IRS using multiple lines until they get through, then they transfer the call to you once they have an agent on the line. It saved me from having to manually redial for hours. The service basically handles the frustrating part (waiting on hold and getting disconnected) for you. I was skeptical too, but after wasting entire afternoons trying to reach someone, the 20-minute wait time was absolutely worth it. They can't help with your actual tax question - they just get you connected to the IRS agent who can.
0 coins
Noah Torres
I need to eat my words about Claimyr. After posting my skeptical comment, I was so desperate to get through to the IRS about my mortgage points issue that I tried it. Within 15 minutes I was talking to an actual IRS representative! I explained my situation about seller-paid points not showing up on my 1098, and the agent confirmed that I should report the full points amount by combining what's on the 1098 with the additional amount on Schedule A. The funny thing is, the agent mentioned they get this question all the time and were surprised more tax software doesn't explain it clearly. They even emailed me the relevant section of IRS Publication 936 that covers this exact scenario. Saved me hours of frustration and uncertainty. Definitely worth it for complicated tax questions like this.
0 coins
Samantha Hall
Something else to consider - points are usually deductible in full in the year paid only if they meet certain criteria. Did you use the mortgage to buy or improve your main home? Was paying points a standard practice in your area? Was the amount reasonable? If any of these aren't true, you might need to amortize the points over the life of the loan instead of deducting them all at once.
0 coins
Avery Flores
•Yes, this was for purchasing my primary residence, and the points were standard in my area (about 1% of the loan amount). The mortgage broker confirmed this was typical for getting a rate reduction. Anything else I should be concerned about for deducting them in full this year?
0 coins
Samantha Hall
•Sounds like you're good to go then! The other requirements are that the points must be computed as a percentage of the loan principal, shown clearly as points on your settlement statement, and paid directly by you rather than included in the loan amount. Since you paid part and the seller paid part, but they're clearly identified as points on your closing statement, you meet all the criteria for immediate deduction. Just keep good records of the transaction, especially documenting that the $6,000 seller credit was specifically applied to points rather than other closing costs.
0 coins
Ryan Young
Has anyone used TurboTax to handle this situation? I've got almost the identical scenario (seller paid part of my points) but I can't figure out where to enter the points not on the 1098. The software keeps wanting me to just enter what's on the form.
0 coins
Sophia Clark
•In TurboTax, you need to go to the "Deductions & Credits" section, then "I'll choose what I work on," then "Mortgage Interest and Refinancing." After entering your 1098 info, there should be a question about whether you paid additional mortgage expenses not shown on Form 1098. Select "Yes" and you'll get a screen where you can enter the additional points amount.
0 coins