Points Rolled into Mortgage
posted at 2/7/2012 9:39 AM EST
Can I deduct points on a refinance even though I rolled the points into the mortgage?
Re: Points Rolled into Mortgage
posted at 2/8/2012 9:33 AM EST
In Response to Points Rolled into Mortgage
[QUOTE]Can I deduct points on a refinance even though I rolled the points into the mortgage?
Posted by chris221976[/QUOTE]
Dear chris221976:Points paid on a mortgage are only immediately deductible if paid in connection with securing a mortgage for the PURCHASE of your principal residence. Points paid on a refinancing are deductible by amortizing the points over the life of the new mortgage. If you refinanced into a 30 year mortgage, you would amortize the points over the 360 months of the mortgage, until either: the mortgage is paid off; you sell the house (immediate write off of the balance of the points not previously deducted); or you refinance, again. If you refinance the new mortgage, the remaining balance of the points are immediately deductible IF AND ONLY IF you use a new lender for the replacement mortgage - if you refinance with the existing lender, the remaining balance of points from this refinancing will have to be amortized over the life of the replacement mortgage. If you INCREASED your mortgage balance over the old mortgage balance and did not use the proceeds to improve your home, there are issues regarding the deductibility of the associated interest and amortized points for computation of your Alternative Minimum Tax liability - you may want to consult with a tax preparer to deal with those issues.
Hope this helps in preparing your returns!
Mark H. Misselbeck, C.P.A., M.S.T.Tax Principal, Katz, Nannis + Solomon, P.C.