points for IT deductions in refinance

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I have obtained a refinance loan of $200,000 for a 30-year period. I have paid one point i.e. $2,000. Am I eligible for deductions this year in the IT return report for this amount paid on points?

Samantha · Posted: Thu Dec 08, 2005 4:24 pm Post subject:

Hi Mario,

Certainly you are eligible for deductions and can show it in your return. But the entire amount may not be deductible.

According to the IRS the points need to be allocated to the number of years of your mortgage loan in case of refinance.

Since your loan is for 30 years, so you can deduct only one-thirtieth of the points each year.

If your loan is paid off early, then the balance of the non deducted points can be deducted on the income tax return filed for that year.

Hope this information will help.

God bless you.

For MortgageFit,
Samantha

blue · Posted: Thu Dec 08, 2005 4:46 pm Post subject:

Hi Mario,

Just to add some more. If the refinance loan that you have taken is utilized in the improvement of your house then the part of the points attributable to the improvement money can help in income tax deduction in the year when it is paid.

The balance part of the point will spread out over the loan period.

Regards,
Blue

Samantha · Posted: Thu Dec 08, 2005 5:01 pm Post subject:

Hi Mario,

What Blue said is correct. If in that case there is any objection from the IRS, you can challenge them in the court.

Section 461(g) of the Tax Code has two options where the entire amount of points paid to refinance a personal residence -

Incase the taxpayer refinance to purchase a new home
In case the amount borrowed is used to make improvements of the home

If you need more clarifications feel free to post here.

God bless you.

Thanks,
Samantha

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