RE:  Deduction for Seller-Paid Points

The purpose of this announcement is to inform taxpayers that the State Department of Taxation will follow the Internal Revenue Service's position regarding seller-paid points. The Internal Revenue Service is taking the position that taxpayers may claim an income tax deduction for points paid in connection with the taxpayer's purchase of a home, even if the points are paid by the seller of the property. A taxpayer is allowed a deduction for the seller-paid points, provided the taxpayer(buyer) reduces the basis of the property by the amount of the seller's payment. The new rule is available for taxpayers who have purchased homes after December 31, 1990.

 Taxpayers who are entitled to a deduction for points paid in 1993 and who have not already filed their tax return should claim the deduction by including the amount paid on line 9aof Schedule A of their 1993 Form N-12 if the points were reported to the taxpayer on federal Form 1098, or on line 10 if the points were not reported on federal Form 1098. Taxpayers who have already filed their 1993 tax return and those who are entitled to claim a deduction for points paid in either 1991 or 1992 should file an amended return on Form N-188X, and should write "seller-paid points" at the top of the form. A copy of the settlement statement (often referred to as the "HUD-1") received at the time of the closing should be attached to the amended return.
 
 

/s/
RICHARD F. KAHLE, JR.
Director of Taxation