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When to deduct home-sale points

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in Small Business Tax

Q: We just got married and are looking to buy a house. If we buy at the end of the year, we may not have enough expenses to itemize our deductions for 2005. Can we still deduct any points we might have to pay on a mortgage? J.V., Leesburg, Va.

A: Not this year. You must deduct any points (i.e., loan origination fees) as mortgage interest on Schedule A of your tax return. So, if you're just claiming the standard deduction, you can't write off any points for 2005. That, alone, may be reason enough to itemize. Tip: If you don't itemize, you can still amortize the points over the course of the loan. For instance, if you pay $3,000 in points on a 30-year mortgage, you can write off $100 each year for the next 29 years (assuming you'll be itemizing).

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