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Points paid when refinancing your home loan must be amortized over the life of the loan, and can not be taken in full in the year incurred. However, if the loan proceeds are used to substantially improve your main residence, then the points may be fully deductible in the year paid. When using only a portion of the loan proceeds to make home improvements, only that portion may be deducted in the year paid with the remainder amortized over the life of the loan.
If the loan is paid off early, any remaining points can be deducted in the year of pay off. Be aware however, that if the refinancing is with the same lender, then the remaining points from the old loan will only be deductible over the life of the new loan.
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