Settlement Statement Income Tax Analysis
|Hud Reference||Item Description||Residence
|Business or Rental
|106-107||City/Town/County Taxes||1 Deduct||N/A||1 Deduct||N/A||1 Deduct||N/A|
|109-112||Payoff of Existing Loans—Interest Portion Only||N/A||Deduct||N/A||Deduct||N/A||Deduct|
|Lines 210-211 Reduce Real Estate Taxes or Increase Income|
|212||Assessments—Improvements||Reduction of Cost||Reduction of Cost||Reduction of Cost||Reduction of Cost||Reduction of Cost||Reduction of Cost|
|801-802||Loan Origination/Discount (Points)||2—Deduct||3—Amortize||Amortize||Amortize||Amortize||Amortize|
|803-811||Other Loan Costs||N/A||N/A||N/A||N/A||Amortize||Amortize|
|901||Interest Adjustment (If not included on form 1098)||Deduct||Deduct||Deduct||Deduct||Deduct||Deduct|
|902-905||Mortgage and Hazard Insurance||N/A||N/A||N/A||N/A||Deduct||Deduct|
|1001-1008||Reserves Deposited With Lender||N/A||N/A||N/A||N/A||4 N/A||4 N/A|
|1202-1205||City/County and State Tax Stamps
& Transfer Taxes
|1301-1305||Additional Settlement Charges||Cost||N/A||Cost||N/A||Cost||Amortize|
- 1) Deduct only amounts applicable to the time period purchaser owns the property; remainder is
- 2) Deductible if all of the following conditions are met:
- Designated on the Uniform Settlement Statement as points incurred in connection with the indebtedness.
- Computed as a percentage of the amount borrowed.
- Charged under established business practice of charging points for loans in the area in which the residence is located.
- Paid in connection with the acquisition of principal residence and the loan is secured by such residence.
- Paid directly by the taxpayer. If paid by the seller after 12/31/90, points are deductible by the buyer. However, the basis in the residence must be reduced by the amount deducted by the buyer that was paid for by the seller.The points must be provided by the funds of the taxpayer (i.e. cash downpayments, escrow deposits and/or earnest money applied at closing must equal or exceed the amount to be deducted at as points) and not from proceeds of the loan.
- 3) Deductible if original loan was short-term financing used to finance acquisition of principal residence (see also 2 above)
- 4) Deductible when actually paid by lender from funds withheld.
Prepared By AND Reprinted with permission of: Liptz, Roberts and Marquez, Chartered, Certified Public Accountants, 5530 Wisconsin Avenue, Suite 1100, Chevy Chase, MD 20815 Phone: (301)657-2900 Fax: (301)657-2166.
This information is for general information purposes and should not be relied upon in a specific transaction without first consulting Liptz, Roberts and Marquez, Chartered or a professional tax advisor.