Purchased a house in 2022 and started renting out a room 2 months later. Can I deduct a prorated amount of my mortgage points paid instead of amortizing?

Forum|Forum|3 years ago
January 24, 2023
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Hi all, I have a quick question regarding my primary residence and deducting points paid on my mortgage

I purchased my primary residence earlier this year and converted 1 of 3 bedrooms (<10% of my home) into a rental. I entered all of my information into the Turbo Tax Home and Business software and was able to have it correctly calculate the deduction for mortgage interest but it doesn't seem to automatically give me the mortgage point deduction.

My question is, am I able to take this deduction (say 90% of the points paid if I rent out 10% of my residence) or does the IRS not allow it? If it is possible, will I need to manually calculate and enter the values into TurboTax or is there a screen that I will need to locate? Thank you.

TurboTax Home & Biz Windows

PatriciaV

Employee

No, home mortgage points for your primary residence are itemized deductions for Schedule A and cannot be allocated to rental activities.
See: IRS Tax Topic 504 - Home Mortgage Points

However, if the mortgage was secured by a rental property, points would be amortized over the life of the loan.

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aharkenAuthor

Thank you so much for the response!

A few quick follow up questions:

1. On the Turbo Tax product, would I enter 0 for points on Schedule E and then all of the points on a separate entry on my Schedule A?

2. As far as the mortgage interest deduction, would I manually calculate the portion of mortgage interest that applies to the room I rented for the period of time it was occupied? So if it were 10% of my house and it was occupied for 50% of the time I owned the house last year, would I allocate 5% of the total interest?

GeorgeM777

Following up on the post from @TurboTaxVal,

No. If you are using the straight-line method to amortize the points over the life of the loan, this is reported on Schedule E.
Yes. Allocate that portion of the mortgage interest that relates to the rental portion of your home. For example, if the mortgage interest was $1,000, ten percent of the $1000 is allocated to your rental--$100. However, because the property was rented for only half the year, in this example, the mortgage interest deduction would be $50.

@aharken

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