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Tax deductibility of mortgage refinance points

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Dear Tax Talk,
Are mortgage refi points tax deductible? If so, can I deduct them all at once, or must they be spread out?

Thank you,
— Sigmon

Dear Sigmon:
Only points that you pay on the purchase of your principal residence are tax deductible in the year paid. All other points, paid either in refinancing your primary residence, purchasing a second home or buying rental property, are deductible over the term of the mortgage.

For example, if you pay $3,000 to refinance your home over a 30-year mortgage, you can deduct $100 a year for the next 30 years. If you pay off the loan early or when you sell the property, you can deduct the balance of the points in that year.

More on the overall tax breaks of mortgage loan points can be found in this tax tip.

And check out our mortgage refi channel for more good information and tips on refinancing your home loan.