Where to Deduct Points – Figured out that your points are deductible? Here’s how you deduct them: Your lender will send you a Form 1098. Look in Box 2 to find the points paid for your loan.
If you don’t get a Form 1098, look on the settlement disclosure you received at closing. The points will show up on that form in the sections detailing your costs or the sellers’ costs, depending on who paid the points. Report your points on Schedule A of IRS Form 1040.
There are two things related to points that you can’t deduct:
1. Interest buy-downs your builder paid
Some builders put money in an escrow account (as a buyer incentive) that the lender taps each month to supplement your mortgage payment. Those aren’t considered points even though the money is used for an interest payment and it’s prepaid. You can’t deduct the money the builder put into that escrow account.
2. Interest payments from government programs
You can’t deduct points paid by a federal, state, or local program, such as the federal Hardest Hit Fund, to help you if you’re experiencing financial trouble.