How to Claim Mortgage Points on a Federal Tax Return

You must use Form 1040 if you itemize your deductions.

Mortgage points are costs you choose to pay when you take out your mortgage to reduce the interest rate on your loan. The Internal Revenue Service allows you to deduct the cost of mortgage points as an itemized deduction. To claim the deduction, you need to document your costs with Form 1098 and use Schedule A to list your itemized deductions. Because you must forego the standard deduction, you should only claim the mortgage points tax deduction if all of your itemized deductions total more than your standard deduction.

Things You'll Need

• Form 1098
• Schedule A

Instructions

1. Receive a Form 1098 from your lender in January of the following year after getting your mortgage. The Form 1098 will report the interest you paid and points paid, among other expenses. If you do not receive a Form 1098 by early February, contact your lender.

2. Look in Box 2 of your Form 1098 to determine how much you paid in mortgage points for the year. If you are refinancing, you must divide this amount by the number of years of the term of the loan. For example, if you refinanced your mortgage for another 15 years and paid $3,000 in points, you would divide $3,000 by 15 to find that you would deduct $200 each year.

3. Add the deductible mortgage points amount to your deductible mortgage interest.

4. Report the amount of your mortgage points and interest on Line 10 of your Schedule A. This amount will be added to your other itemized deductions and the total used to reduce your taxable income.

References

• IRS: Topic 504--Home Mortgage Points

Resources

• IRS: Form 1098
• IRS: Schedule A