Requirements for deducting mortgage points in full
To deduct the full amount of points in the year they are paid, all of the following must be true:
- You use the cash method of accounting.
- The mortgage was used to buy or build your main home.
- The mortgage loan is secured by your main home.
- Charging points is an established business practice in your area.
- The number of points paid does not exceed what is typically charged in your area.
- You did not borrow the funds used to pay the points.
- The settlement statement shows the amount of points paid at closing.
- The points are a percentage of the principal amount of the mortgage.
If all these conditions are met, you can usually deduct the points in full for the tax year in which you paid them.
Choosing to amortize points
You can also choose to amortize (spread out) the deduction for points over the term of your mortgage. This option is sometimes preferable if your itemized deductions are less than your standard deduction in the year you bought your home.
Points paid on a refinance
Points paid to refinance an existing mortgage must generally be deducted over the term of the new loan rather than all at once.
If you refinance or sell your home before the loan term ends, you can deduct any remaining, unamortized points in the year of the sale or refinance.
Please note: This page offers general legal information, not but not legal advice tailored for your specific legal situation. Rocket Lawyer Incorporated isn't a law firm or a substitute for one. For further information on this topic, you can Ask a Legal Pro.
