Are Points Tax Deductible?
Points are generally not fully tax deductible in the tax year paid but must be spread over
the life of the loan or mortgage. There is an exception. Points are fully tax deductible in the year you pay them
only if all of the following conditions apply.
Your loan is secured by your main home
Paying points is an established business practice in the area where the loan was made
The points paid were not more than the points generally charged in that area
You use the cash method of accounting
The points were not paid in place of amounts that ordinarily are stated separately on the settlement
statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes
The funds you provided at or before closing, plus any points the seller paid were at least as much as
the points charged
You use your loan to buy or build your main home
The points were computed as a percentage of the principal amount of the mortgage
the amount is clearly shown on the settlement statement as points charged for the mortgage. The points
may be shown as paid from either your or the sellers funds
If you meet all of the tests above, then you can choose to fully deduct the points in the year
paid or deduct them over the life of the loan or mortgage.