Are points deductible on a refinance?

If you were one of the many homeowner’s that refinanced in 2010 you are probably wondering if any of the costs associated with refinancing are deductible on your taxes.  You can download the IRS’s publication 936 that deals with home mortgage interest HERE.  Or, I have included some of the highlights below:

  • Points: In general points on a refinance are deducted on a pro-rated basis over the life of the loan.  For example, if you paid $3,000 in points on a 30-year mortgage then $100 ($3,000/ 30 years) would be deducted each year in addition to the qualifying interest you paid.
  • Per Diem Interest: Chances are at closing you paid some interest on the new mortgage you took out.  So long as your new mortgage is replacing qualified home acquisition debt or home equity debt (which it is in most cases) then this interest is tax deductible and you should have received a 1098 from the company you refinanced with.  If you’re looking at your final HUD-1 settlement statement this amount is shown on line 901.
  • Property Taxes?: Depending on the time of year that you closed your refinance you may have paid property taxes directly to the county your home is located in.  In Oregon this would only impact homeowner’s that refinanced in September -November.  This would also show up on your final HUD-1 settlement statement.

There are some fairly obscure rules regarding points if you refinanced with the same lender that your previous loan was with.  Be sure to speak with your tax professional as I am not a licensed tax preparer.