New rule on mortgage points OK'd for state taxes

April 01, 1994|By Lorraine Mirabella | Lorraine Mirabella,Sun Staff Writer

State Attorney General J. Joseph Curran Jr. said yesterday that Maryland income-tax payers who bought homes after 1990 may deduct seller-paid mortgage loan points.

The ruling could save taxpayers hundreds of dollars.

Since Monday, when the Internal Revenue Service expanded rules for deducting points charged by mortgage lenders, it had been unclear whether the changes applied to state income tax as well.

The old rules allowed buyers to deduct any points they paid for a mortgage to buy their primary home. But points paid by sellers on the buyer's behalf were excluded. A point is 1 percent of a mortgage loan.

Yesterday's decision -- just two weeks before the April 15 filing deadline -- was based on an earlier ruling that found state taxpayers should get the benefit of any federal deduction, said Mr. Curran.

"Maryland taxpayers will get a break," Mr. Curran said, though he noted, "there will be some less revenue to Maryland as a result of this ruling."

The ruling applies to homes purchased in 1991 and later.

Anyone who hasn't filed a 1993 Maryland income tax return can report the deduction on federal Schedule A, attach it to Maryland Form 502 and include a copy of the settlement statement, HUD-1. About a million Marylanders have yet to file returns.

Those needing an extension should file Form 502E by April 15. They will have four months to file their paperwork, though any anticipated taxes owed are due April 15.

Anyone who has filed a 1993 return should wait to receive a check before filing an amended return including the deduction.

Anyone seeking the deduction for the 1991 or 1992 tax year should file Maryland Form 502X with federal Form 1040X and a settlement sheet. Taxpayers have three years from the due date of the original return to file amended forms.

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