Real Life Situations

Posted on January 11, 2011 by The Weekly Commentary

Question:

I refinanced my home mortgage last year; and, I paid 2 points (2% of the mortgage balance) in order to reduce the mortgage rate. Are the points I paid deductible on my income tax return?

Answer:

Yes, but not all in one year. The deduction of the points is spread evenly over the life of the mortgage. For example, if the new mortgage is a 20 year mortgage, then only 1/20 of the points are deductible in each year. NOTE: points paid on a mortgage used to BUY the house are fully deductible in the year the house is purchased.

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