Income Tax Deductions
Home Refinancing Points
If you refinanced your home, you may be eligible to
deduct some costs associated with your loan.
Generally, if you itemize, the “points” paid
to obtain your home mortgage may be deductible as mortgage interest.
Points paid to obtain an original home mortgage can be, depending
on circumstances, fully deductible in the year paid. However, points
paid solely to refinance a home mortgage usually must be deducted
over the life of the loan.
For a refinanced mortgage, the interest deduction for points is
determined by dividing the points paid by the number of payments
to be made over the life of the loan. This information is usually
available from lenders. You may deduct points only for those
payments made in the tax year. For example, a homeowner who paid
$2,000 in points and who would make 360 payments on a 30-year mortgage
could deduct $5.56 per monthly payment, or a total of $66.72 if
he or she made 12 payments in one year.
However, if part of the refinanced mortgage money was used to
finance improvements to your home and if you meet certain
other requirements, the points associated with your home improvements
may be fully deductible in the year you paid the points.
Also, if you are refinancing a mortgage for a second time,
the balance of points paid for the first refinanced mortgage may
be fully deductible at pay off.
Other closing costs — such as appraisal fees and other non-interest
fees — generally are not deductible. Additionally, the amount
of Adjusted Gross Income can affect the amount of deductions that
can be taken.
Frequently Asked Questions
I refinanced my home last year and paid points. Are they
all deductible this year?
Generally points paid to refinance your home are not deductible
in their entirety in the year paid. They are "amortized" or
deducted over the life of the loan.
If I must deduct points over the life of my mortgage,
and I have a 30 year mortgage, does this mean that I divide the
points paid by 30 and enter that amount on Schedule A?
No, you don't divide the points by 30. If you choose to use the
straight-line method, you need to divide the points by the number
of payments over the term of the loan and deduct points for a year
according to the number of payments made in the year. If the loan
ends prematurely, due to payoff or refinance with a different lender,
for example, then the remaining points are deducted in that year.
Points not included in Form 1098, the Mortgage Interest Statement
reported to you by your financial institution (usually
not included on a refinance), should be entered on line 12 of Form
1040, Schedule A, Itemized Deductions.
For details on home refinancing deductions and points,
Publication 936: Home Mortgage Interest Deduction (PDF 139kb).
The information provided in this website is
not legal advice and should not be interpreted as legal advice.
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information in summary form. This information may not be comprehensive,
is subject to change, and may not apply to all individual circumstances.
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