[startupcfo]

I’m hearing seemingly conflicting answers on how to deduct points during a refinance. Let’s say I have a have a mortgage with ABC Bank, 30 years fixed at 6%. I believe I can get a 30 year fixed mortgage at 4% in today’s market. Let’s even pin down the signing date to June 30th of 2016. How do the refinance fees get deducted?

A) all in 2016 because that’s the year I started the 2nd loan?
B) spread out evenly over the next 30 years, and I only get credit for 6 months in 2016?
C) My choice as the taxpayer?
D) depends on whether the refinance was with my old bank or is a new lender?

AUD - 93
BEC - 87
FAR - 77
REG - 77

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Corporate finance leader

BEC - 87 | 02/28
REG - 70 | 06/10, REMATCH | 08/30
AUD - XX | 09/10
FAR - XX | 12/10

[Anonymous]

Mortgage points that are prepaid interest are generally deductibe in the year paid if you itemize. There are some exceptions, e.g. mortgages in excess of $1M or property other than your primary residence.

Other costs to refinance the mortgage on your home, like title insurance or bank closing costs, are not generally deductible for individuals.

[jgod]

“Points paid to refinance an existing home mortgage cannot be immediately deducted, but must be capitalized and amortized as an interest deduction over the life of the loan.”

Taken from South-Western Federal Taxation Individual Income Taxes textbook.

rev. rul. 87-22 is cited

I say B) is the answer to your question

Two more.

AUD- 99 (6/8/16)
REG- TBD
FAR- TBD
BEC- TBD

[Author]

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