Can you deduct points the seller paid?

Who is treated as paying

When a home seller pays points to help a buyer get a mortgage, the buyer does not get a free ride from the tax rules. Publication 936 says a borrower is treated as paying any points that a home seller pays for the borrower’s mortgage. The term “points” also covers loan placement fees that the seller pays to the lender to arrange financing for the buyer. In practice, a concession that appears on the closing statement as a seller credit toward your points is attributed to you for tax purposes.

What the seller gets

The seller cannot deduct those fees as interest. The publication calls them a selling expense that reduces the amount realized on the sale. That matters for a seller computing gain; Publication 523 covers selling a home, and the home sale capital gain exclusion calculator gives a feel for the exclusion that often applies to a main home.

What the buyer gets, and gives up

The buyer treats the seller-paid points as the buyer’s own and reduces the basis of the home by that amount. If all the tests for a year-paid deduction are met, the buyer can deduct the points in the year paid. If any of those tests is not met, the buyer deducts them over the life of the loan. So the benefit is a deduction now or a deduction spread over time; the price is a lower basis that can increase a later taxable gain when you sell.

The year-paid tests, in short: loan secured by your main home, points customary in your area and not above what is charged there, cash method, points not paid in place of separately stated fees such as appraisal, inspection, title, attorney fees or property taxes, funds you provided at or before closing plus the seller’s points at least equal to the points charged, a loan that buys or builds your main home, points figured as a percentage of principal, and an amount clearly shown as points on the settlement statement, which may be paid from either your funds or the seller’s.

The funds test and why seller points help

The sixth test compares what you brought to the table with what the points cost. The funds you provided do not have to be applied to the points; they can include a down payment, an escrow deposit, earnest money and other money paid at or before closing, but not money borrowed from your lender or mortgage broker. Seller-paid points count toward meeting the test. That is why a seller concession can rescue a deduction that a small down payment would otherwise cap.

The publication’s two examples

Example one: you take a $100,000 mortgage to buy a home in December and are charged one point ($1,000). You meet every test except the funds test, because the only funds you provided were a $750 down payment. You deduct $750 in the year paid and spread the remaining $250 over the life of the mortgage.

Example two: the facts are the same, but the seller also paid one point ($1,000) to help you get the mortgage. In the year paid you deduct $1,750: the $750 of your own funds plus the $1,000 the seller paid. You still spread the remaining $250, and you reduce the basis of the home by the $1,000 the seller paid. Enter the same numbers in the calculator above to check them.

A short illustration of the basis effect

This is an illustration, not the publication’s example. If you buy a home for $400,000 and the seller pays $4,000 in points, your basis is $396,000 for later gain calculations, not $400,000, because the publication reduces basis by the seller-paid amount. Your deduction this year is real money, but the lower basis can raise taxable gain if you later sell above the exclusion. Record the amount on a worksheet you keep with your closing statement.

Check Form 1098 and your closing statement

If you purchased a principal residence during the year, Form 1098 should show the points paid during the year, including seller-paid points, that are deductible as interest to the extent you do not exceed the home acquisition debt limit. The publication also notes that the form can report points you cannot deduct, so compare it with the settlement statement. Points reported on Form 1098 go on Schedule A, line 8a; deductible points not reported go on line 8c.

When this does not apply

If you do not itemize, there is no deduction to take. If the loan is for a second home, points are deductible only over the loan. If the mortgage exceeds the limits in Part II, you cannot fully deduct the points on the excess; the acquisition debt page shows how the limit works. For the general rules, see are mortgage points deductible, and use the mortgage points calculator to decide whether buying down the rate pays.

Sources

• IRS Publication 936, Home Mortgage Interest Deduction (2025): “Points paid by the seller” and “Funds provided are less than points”, plus the Reminders, Table 1 and Table 2. Read November 2, 2026.

Edition read: Publication 936 (2025), for use in preparing 2025 returns. Dollar limits in this publication are for 2025; the publication notes that tax legislation enacted July 4, 2025 (P.L. 119-21) may affect federal deductions, so check IRS.gov/Pub936 and the Schedule A instructions for your tax year. This page summarizes the publication and does not replace it. Marked for human review.