by Michael Lodge
When you are financing or re-financing a home sometimes homeowners are charged points. Some think they can be taking all at one time, but there are specific rules on the deduction of points.
Question: If I must deduct points over the life of my mortgage, and I have a 30-year mortgage, does this mean that I divide the points paid by 30 and enter that amount on Schedule A?
No, while you have to deduct the points over the life of the loan (amortize), you don’t divide the points by 30. Instead, you generally may divide the points by the number of payments scheduled over the term of the loan and deduct points for each year according to the number of payments made in that year.
- If the loan ends prematurely due to payoff or refinance with a different lender for example, then the remaining points are deductible in that year.
- Points not included in Form 1098, (usually not included on a refinance) should be entered on Schedule A (Form 1040), Itemized Deductions, line 12 “Points not reported to you on Form 1098.”
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