Overlooked deductions on old returns

Dear Tax Talk:
I sold my house last year. While preparing my taxes, a friend suggested that I claim a deduction for the points I paid on my previous mortgage. After entering it into my tax program, I got a substantial break on what I owed. However, I’m not 100 percent sure I haven’t already claimed these points on a previous tax return and I don’t have all my previous returns. How can I find out if I already claimed this? Thanks for your help.

Dear Eric:

You’ve got two issues here. The first one is finding your old tax returns. The second matter then is to determine if your mortgage points are deductible.

To get a copy of a prior tax form, download and complete
Form 4506, Request for Copy or Transcript of Tax Form. There is no cost to get the information but expect to wait 60 days.

Now, while you are waiting for your old forms, let’s determine if you should have previously claimed these points. Even if you can’t find your earlier return, if you weren’t entitled to claim those points on an earlier return, then you should be entitled to claim them on the current return. Of course, you should
go back and amend your earlier return.

Now that
home sales are practically tax-free, a lot of folks and some tax return preparers forget to look at the sale for any special deductions. If you refinanced your original mortgage on your sold home then any points you paid on the refinance were not deductible in the year that you refinanced. Instead, these points were supposed to be amortized over the life of the loan.

Since the amount tends to be immaterial, a lot of people don’t bother amortizing the points. However, when you sell the home, the balance of the un-amortized points are deductible, hence your better tax program solution. Therefore, even if you can’t find those earlier returns, you may be entitled to the deduction if the points were from an earlier refinance.