Deducting Costs of Refinancing Your Home - John R. Dundon II, Enrolled Agent
7761
post-template-default,single,single-post,postid-7761,single-format-standard,bridge-core-3.0.1,qodef-qi--no-touch,qi-addons-for-elementor-1.5.7,qode-page-transition-enabled,ajax_fade,page_not_loaded,,qode_grid_1300,footer_responsive_adv,qode-content-sidebar-responsive,qode-theme-ver-29.3,qode-theme-bridge,qode_header_in_grid,wpb-js-composer js-comp-ver-6.10.0,vc_responsive,elementor-default,elementor-kit-269
 

Deducting Costs of Refinancing Your Home

Deducting Costs of Refinancing Your Home

If you refinanced your home mortgage you may be eligible to deduct some costs associated with getting the new loan. The term “points” is used to describe certain charges paid to obtain a home mortgage. Here are some things to remember when deducting points:

  • Taxpayers who itemize deductions generally may be able to deduct the points paid to obtain a home mortgage as mortgage interest

  • Points paid solely to refinance a home mortgage usually must be deducted over the life of the loan

  • Points can be fully deducted in the year paid if certain tests are met

  • For a refinanced mortgage, the interest deduction for points is determined by dividing the points paid by the number of payments to be made over the life of the loan. This information is usually available from lenders. Taxpayers may deduct points only for those payments made in the tax year.

  • However, if part of the refinanced mortgage money was used to finance improvements to the home and if the taxpayer meets certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid. Also, if a homeowner is refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible in the year it is paid off.

  • Other closing costs – such as appraisal fees and other non-interest fees – generally are not deductible. Additionally, the amount of Adjusted Gross Income can affect the amount of deductions that can be taken.



Share