That’s a question I will leave for other members of the Forum family to answer based on their own experience. You’ll find legal and tax questions are ones I will always refer to a professional since I am not qualified to answer questions in either realm.
Before posting my question I had read several articles (including your linked articles) which could be a reference. This link is for the IRS publication https://www.irs.gov/taxtopics/tc504
They all refer to similar conditions. It is not really clear if it would qualify or not.
One of the requirements is “is paying points is an established business practice in the area where the loan was made”. Since NACA allows buyers to buy down point as much as they can does this mean it meets the requirement?
Also, “The amount shows clearly as points on your settlement statement.” Will it show on my loan statement?
The amount that you pay directly for buy-down is deductible if you itemize. For example, I put down ~$22K at closing. Of that, $10K went towards interest buy-down, $11K went towards principal reduction (which Citi matched with an additional interest rate reduction), and $1K towards other closing costs. The $10K was reported as points paid on my 1098 and I was able to list it on my Schedule A.
Thanks for the post Lex
I believe this is what I was expecting to hear. Real life experience is very important.
I am planning to buy down interest rate and significantly decrease my monthly payment.
I can save some extra money if it is tax deductible.