Refinance loan with points, used to renovate immediately sold to another lender

Forum|Forum|5 years ago
April 26, 2020
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I refinanced my home and got extra to renovate. I paid $5900 points. Within a week it was sold to another lender. Turbo tax told me in the help section that under those conditions I deduct the entire amount rather than amortize. The points are reported on the 1098 form. They are not on the company which bought it. The only way to put enter the amount was to declare it as a new loan. Is this ok? Is there another way?

Best answer by MoreDisgusted

You are only partially correct. According to IRS publication 936, generally the points on a refinance must be amortized. If the loan is sold you keep amortizing, however if you pay it off (even if by refinancing, you claim the remaining points all at once. TTAX handles this ok. There however another exception which the TTax help referred to and was my case. If you get extra money to be used to upgrade, modify, remodel your home that portion of the points is fully deductible in the first year. E.g. You refinance $250,000 and get an additional $50,000 (total $300,000) to remodel and upgrade your home and pay 3000 points. You can deduct 50000/300000x3000 = 3000/6 = $500 the first year. The remainder ($2500) you must amortize. TTax does not handle this and furthermore won't let you handle it manually using the forms to override it. (Maybe someone else can do it, but the online help person didn't even know what I was talking about)

Opus 17

No, I think you are reading the help incorrectly (or it is wrong, in which case I can report it). You can deduct the remaining on deducted points if you have refinanced again with a different lender. You did not refinance with a different lender, your loan was transferred. That’s not the same thing. You must deduct the points ratably over the life of the loan.