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I purchased a new home in 1999 and the builder paid the fees associated with the 2-1 buydown loan. The money is held by my mortgage company and applied to my monthly mortgage payment. When I received my mortgage interest statement from my mortgage company it indicated the amount of interest that I paid in Box 1. However, the 1098 also showed a 1999 interest detail where it shows my interest payments and the buydown payments, which are listed as "Buydown/Subsidy payments.

My question is, can I deduct this interest (buydown payments) even though it was actually paid by the seller? I assume it wasn't reported to the IRS since it is not reflected in box 1 on the 1098.

Thanks for the help,

Jas
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<<I purchased a new home in 1999 and the builder paid the fees associated with the 2-1 buydown loan. The money is held by my mortgage company and applied to my monthly mortgage payment. When I received my mortgage interest statement from my mortgage company it indicated the amount of interest that I paid in Box 1. However, the 1098 also showed a 1999 interest detail where it shows my interest payments and the buydown payments, which are listed as "Buydown/Subsidy payments.>>

Ok...

<<My question is, can I deduct this interest (buydown payments) even though it was actually paid by the seller? I assume it wasn't reported to the IRS since it is not reflected in box 1 on the 1098.>>

Now I'm confused. Does the Form 1098 show only the interest that YOU paid? Or does it show the total of the interest that YOU paid AND the buydown interest paid by the builder?

I believe that the only deduction that YOU are entitled to...which would be the interest that you paid...and not any of the interest/buydown paid by the builder.

But I also don't have all of the paperwork regarding the transaction. There may be something in there where you actually paid the buydown indirectly somewhere or somehow.

TMF Taxes
Roy

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Roy,

The 1098 lists the interest I paid in box 1 of the form. Futher down on the statement there is a section called the 1999 Interest Detail. This shows the total interest paid to the mortgage company broken down into two sections. It shows interest paid by the borrower (amount reflected in box 1 of the form) and it shows the amount paid by the "Buydown payments".

The builder definitely paid the buydown fees. However on the back of the 1098, the description of box 1 states:

"This amount does not include points, government subsidy payments or seller payments on a buy-down mortgage. Such amounts are deductible by you only in certain cirmcumstances."

This made me think that I could possibly deduct this interest even though it was paid by the builder and applied to my monthly payment.

Thanks for your help on this.

Jas


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The 1098 lists the interest I paid in box 1 of the form. Futher down on the statement there is a section called the 1999 Interest Detail. This shows the total interest paid to the mortgage company broken down into two sections. It shows interest paid by the borrower (amount reflected in box 1 of the form) and it shows the amount paid by the "Buydown payments".
The builder definitely paid the buydown fees. However on the back of the 1098, the description of box 1 states:
"This amount does not include points, government subsidy payments or seller payments on a buy-down mortgage. Such amounts are deductible by you only in certain cirmcumstances."
This made me think that I could possibly deduct this interest even though it was paid by the builder and applied to my monthly payment.


Roy, correct me if I'm wrong, but under the facts above, aren't the buydown payments treated as an adjustment to the sales price (thereby lowering the basis of the home)? If that's the case, then the interest show be deductible.
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<<Roy, correct me if I'm wrong, but under the facts above, aren't the buydown payments treated as an adjustment to the sales price (thereby lowering the basis of the home)? If that's the case, then the interest show be deductible.>>

I would want to see how the deal was put together. It might be possible that this is the case. But I think that you'd really have to look at the documents and what really happened to make a determination.

Without seeing the docs, it's just a guess...at least in my mind.

TMF Taxes
Roy
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