Tax Tip 2016: Write Off Home Refinancing Points

published 6 January 2017

When you buy a house, you get to deduct in one fell swoop the “points” fee paid to get your mortgage. In exchange for paying points up front, the lender reduces the interest rate on your loan.

When you refinance, though, you have to deduct the points paid on the new loan over the life of that loan. That means you can deduct 1/30th of the points annually if it's a 30-year mortgage. That's $33 a year for each $1,000 of points you paid—not much, maybe, but don't throw it away. Even more important, in the year you pay off the loan—because you sell the house or refinance again—you get to deduct all as-yet-undeducted points.

There's one exception: If you refinance a refinanced loan with the same lender, you add the points paid on the latest loan to the leftovers from the previous refinancing, then deduct that amount gradually over the life of the new loan. A pain? Yes, but at least you'll be compensated for the hassle.

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See more tax tips for your 2016 return:

Deduct Job-Hunting Expenses

Out-of-Pocket Charitable Deductions

Deduct State Sales Tax

McCormally retired in 2018 after more than 40 years at Kiplinger. He joined Kiplinger in 1977 as a reporter specializing in taxes, retirement, credit and other personal finance issues. He is the author and editor of many books, helped develop and improve popular tax-preparation software programs, and has written and appeared in several educational videos. In 2005, he was named Editorial Director of The Kiplinger Washington Editors, responsible for overseeing all of our publications and Web site. At the time, Editor in Chief Knight Kiplinger called McCormally "the watchdog of editorial quality, integrity and fairness in all that we do." In 2015, Kevin was named Chief Content Officer and Senior Vice President.