How to Claim Points Paid for Refinancing a Mortgage on Your Income Tax

You must file using form 1040 to claim mortgage refinance points.

When you take out a mortgage or refinance your mortgage, your lender typically gives you the option of paying discount points, which represent an upfront cost paid to lower the interest interest rate on your loan. With a mortgage, you can write off all of the points in the year that you pay them. However, with a mortgage refinance, the Internal Revenue Service requires that you take the deduction over the life of the loan.

Instructions

1. File your taxes using form 1040 and attach schedule A. If you use form 1040A or 1040EZ, you cannot itemize your deductions and claim points paid for refinancing a mortgage.

2. Divide your total points paid by the number of years in the mortgage refinance. For example, if you paid $6,000 in refinance discount points and the term of your refinance equals 30 years, you would divide $6,000 by 30 to find that you could deduct $200 per year.

3. Report the points you paid on Schedule A as points not reported on form 1098. This amount will be used to reduce your taxable income for the year. You can continue to claim this deduction in future years as long as you have the refinanced mortgage.

References

• IRS: Publication 936
• IRS: Schedule A Instructions
• Mortgage Loan: Tax Deductions and Points

Resources

• IRS: Schedule A
• IRS: Form 1040