Refinance Tax Advice - Home Loans Help

"Tax treatment of points paid when refinancing your mortgage."

Refinanced Your Home Mortgage?

If you are one of thousands who locked into a lower home mortgage interest rate, then you've hit the savings jackpot! Besides getting one of the lowest rates in decades, you may be able to deduct some of the refinancing costs when you file this year's tax return.

Key Tax Treatment of Mortgage Refinance Points Paid:

1. The “points” paid to get a home mortgage may be deductible as mortgage interest when you itemize on Form 1040's Schedule A.
    
2. Points paid to get an original home mortgage may be fully deductible in the year paid.
    
3. However, points paid solely to refinance a home mortgage usually must be deducted over the life of the loan.
    
4. For a refinanced mortgage, you figure the interest deduction by dividing the points paid by the number of payments you will make over the life of the loan. You may deduct points only for those payments made in the tax year.

Say you paid $2,000 in points and you will make 360 payments on a 30-year mortgage. You could deduct $5.56 per monthly payment, or a total of $66.72 if you made 12 payments in one year.

If you used part of the refinanced mortgage money to finance improvements to your home and if you meet certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid.

Also, if you are refinancing a mortgage for a second time, the balance of the first refinancing points that you have not previously deducted may be fully deductible in the pay off year.

Other closing costs – such as appraisal fees and other non-interest fees – generally are not deductible. And the amount of your adjusted gross income could affect the amount of deductions you can take.

Any way you look at it, between the lower interest rates and the tax savings, that's money you can take to the bank.

As always, check with a certified professional accountant or your tax adviser for tax treatment advice on your exact situation.

Related Pages

Refinance Mortgage - Complete overview of home refinance topic - Articles about refinancing your home or borrowing against your home equity. How to decide which refinancing loan option is best for you.

Refinance Home Loan Again - Information about refinancing your mortgage a second time - Tips on when it makes sense to refinance your home loan, no matter how new it is.

Refinancing Costs - Advice about mortgage refinancing costs and information about fees, points, closing costs and pre-payment penalties.

Mortgage Refinance Loan - Mortgage refinance loan information and tips on how to get the lowest home mortgage loan refinancing rate.

Mortgage Terms - Information on mortgage terms and what they mean in plain English - View mortgage rates and learn home equity borrowing tips.

No Cost Mortgage Refinance - Information and tips about no cost home mortgage refinance loans and how to determine which home refinance loan is best for you.

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