Finance
In Louisiana, 'mortgage points' paid at closing can potentially be deducted as interest on the buyer's federal income taxes in the year paid, subject to IRS requirements. This is because:
AAll closing costs are tax deductible
BPoints are prepaid interest, and mortgage interest on a primary residence is generally tax deductible (subject to IRS limitations)✓ Correct
CLouisiana law requires mortgage interest deductions
DAll real estate transactions create tax deductions
Explanation
IRS rules allow homeowners to deduct mortgage interest, including discount points paid on a home purchase loan for a primary residence (if they represent prepaid interest), subject to the limitations on the mortgage interest deduction under federal tax law.
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Key Terms to Know
Discount Points
Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Closing CostsFees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Math Concepts
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