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Per IRS Publication 527 Residential Rental Property, page 4:

Points

The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. See Points paid by the seller, later.

Note. Review this section of the publication for details on how to calculate the points you can deduct on your Schedule E. This would need to be manually calculated, per the instructions, and then entered into the TaxAct program as follows. If you are instead using the straight-line method to amortize the points over the life of the loan, see Straight-Line Amortization, later.

Original Issue Discount (de minimis) or Constant-Yield Method

The points allowable each year would be included with the mortgage interest expense on Schedule E, Line 12, and is entered into the TaxAct program as follows:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal.
  2. Click Rent or Royalty Income  in the Federal Quick Q&A Topics menu to expand the category and then click Real estate rental income
  3. Click +Add Federal Schedule E to create a new copy of the form or Review to review a form already created
  4. Continue through the Q&A until you reach the screen titled Rental Income - Expenses, then click Yes
  5. Click Continue or No until you reach the screen titled Rental Income - Mortgage Interest Expense
  6. Enter the deductible amount in the field Mortgage Interest

Note. If the mortgage interest or points were not paid to a financial institution or you did not receive a Form 1098, report the deductible portion on the following screen titled Rental Income - Other Interest Expense.

Straight-Line Amortization

If you are instead using the straight-line method to amortize the points over the life of the loan, this is reported on Schedule E, Line 19 and is entered into the TaxAct program as follows:

  1. Click Federal. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal.
  2. Click Rent or Royalty Income to expand the category and then click Real estate rental income
  3. Click +Add Federal Schedule E to create a new copy of the form or Review to review a form already created
  4. Continue through the Q&A until you reach the screen titled Rental Income - Amortization, then click Yes
  5. The program will proceed with the interview questions for you to enter or review the appropriate information

Note. Use Code Section Number 461 for the amortization of points.

If you again refinance the loan and are able to deduct the remaining points from the first loan in the current year, below is how to enter that in the TaxAct program. See the section Mortgage ending early on page 8 of IRS Publication 936 Home Mortgage Interest Deduction to determine whether you can deduct the remaining points in the year of refinance or if you must deduct the remaining balance over the term of the new loan.

To enter the deduction of remaining points on a refinanced loan:

  1. Click Federal. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal.
  2. Click Rent or Royalty Income to expand the category and then click Real estate rental income
  3. Click +Add Federal Schedule E to create a new copy of the form or Review to review a form already created
  4. Continue through the Q&A until you reach the screen titled Rental Income - Amortization, then click Yes
  5. If, instead, you see the screen Rental Income - Amortization Review, click Add to create a new copy of the worksheet or Review to review a worksheet already created
  6. Continue to the screen titled Amortization - Prior Amortization and enter the date of the refinance as the Date sold:
  7. Complete the information on each screen until you reach the one titled Asset Sale - Gain or Loss
  8. Click Modify and select the bottom option Will report on either the Schedule D Home Sale Worksheet, Form 4684, or Form 8824 to prevent the amount from flowing to Form 4797 (which in this situation you do not need it to).

Now, you need to follow these steps to manually enter that expense on Federal Schedule E:

  1. Click Federal. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal.
  2. Click Rent or Royalty Income to expand the category and then click Real estate rental income
  3. Click +Add Federal Schedule E to create a new copy of the form or Review to review a form already created
  4. Continue through the Q&A until you reach the screen titled Rental Income - Expenses, then click Yes (if you see a screen offering for you to Jump to Topic, click the option for Expenses: and you can reach the expense section quicker - the Jump to Topic option is offered based on the information you have already entered in the program)
  5. Click No on the screen titled Rental Income - Vehicle Expenses and continue to the screen titled Rental income - Other Expenses
  6. Enter a description of Amortization Refinanced in the Description: field and the amount remaining to be deducted in the Amount: field
  7. The description and amount will flow to line 19 of Federal Schedule E and if there are multiple "Other Expenses" it will be reflected in the total on line 19. The description and amount will appear on the attached statement that prints (and is electronically filed) with the return

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