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When seller pays points, it's buyer's deduction


Q: I'm currently negotiating to buy a house. The seller has offered to pay up to 1.5 points to help me with my mortgage. Can I deduct the points paid by the seller on my income tax return?

A: Yes. Under a new IRS ruling handed down within the last two months, homeowners can now deduct from their income tax return all points paid by the seller.

This change, retroactive to 1991, will affect federal and state tax returns. Under the old rules, homebuyers could deduct only points that they paid on their mortgage for their principal residence. Now, buyers can deduct points paid on their behalf by the seller.

(A point is a fee charged by the broker to provide a mortgage for the purchase of a home. One point equals 1 percent of the loan amount. For example, if you paid two points on a $100,000 loan, the points would equal $2,000. The terms "loan origination fee," "loan discount," or "discount point," may be used frequently with "points" on your settlement sheet.)

Q: I recently purchased my first home. I moved in after settlement and found that the dining room lighting fixture had been removed. What is the law dealing with this situation?

A: Under Maryland law, "fixtures" are supposed to convey or transfer with the house while personal property, or "chattel," does not transfer with a house. The two major tests in determining whether something attached to a house is part of the house are:

* 1. The intention of the person who attached the item to the house, and whether he had meant to make it a permanent part of the house;

* 2. Whether the item is permanently attached, and its removal would damage the house. Because a dining room lighting fixture usually can be easily removed without damaging the house, they are generally not considered a part of the house and are not automatically included with the sale.

I recommend buyers list all lighting fixtures, appliances, curtain rods and outside sheds in the sales contract. When in doubt, list the items as ones that will remain with the house.

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