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

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.

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, see IRS Publication 936: Home Mortgage Interest Deduction (PDF 139kb).

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