Quick Answer
Mortgage points paid when refinancing are deductible, but must be spread over the life of the loan rather than deducted in full the first year. On a $300,000 refinance with 2 points ($6,000), you'd deduct $200 per year over a 30-year loan, potentially saving $48-74 annually in taxes depending on your bracket.
Best Answer
Robert Kim, CPA
Best for homeowners who have refinanced and paid points to secure a lower rate
How mortgage points work when refinancing
Mortgage points paid during a refinance are deductible, but the IRS requires you to spread the deduction over the life of the loan rather than claiming it all in the first year. This is different from purchasing a home, where points are typically fully deductible in the year paid.
Each point equals 1% of your loan amount. If you refinance a $300,000 mortgage and pay 2 points, that's $6,000 in points.
Example: $300,000 refinance with points deduction
Let's say you refinance your $300,000 mortgage and pay 2 points ($6,000) to get a better rate:
When you can deduct refinance points faster
There are several situations where you can accelerate or fully deduct refinance points:
Comparison: Purchase vs. refinance point deductions
Key factors that affect your deduction
What you should do
Track your points deduction each year using IRS Form 1098 from your lender, which shows the points paid. If you paid points in a previous refinance and are refinancing again, claim any remaining unamortized points from the old loan as a full deduction this year. Use our return scanner to check if you've been claiming this deduction properly.
Key takeaway: Refinance points must be deducted over the loan life ($200/year on $6,000 points over 30 years), but remaining points become fully deductible when you sell or refinance again.
*Sources: [IRS Publication 936](https://www.irs.gov/pub/irs-pdf/p936.pdf), [IRS Topic 504](https://www.irs.gov/taxtopics/tc504)*
Key Takeaway: Refinance points are deductible over the loan life, saving $48-74 annually per $6,000 in points, with accelerated deductions available when selling or refinancing again.
Point deduction timeline comparison for different refinance scenarios
| Refinance Type | First Year Deduction | Annual Ongoing | Total Tax Savings (24% bracket) |
|---|---|---|---|
| Standard refinance ($6,000 points) | $200 | $200/year × 30 | $1,440 over loan life |
| Home improvement cash-out (50% improvement) | $3,167 | $167/year × 30 | $3,927 total |
| Refinance with previous points ($3,468 remaining) | $3,635 | $167/year × 30 | $4,595 total |
More Perspectives
Robert Kim, CPA
Best for homeowners who refinance regularly to take advantage of rate drops
The refinancing advantage for point deductions
If you're someone who refinances every few years to chase better rates, you have a significant tax advantage that many miss. Each time you refinance, any remaining unamortized points from your previous loan become fully deductible in the year of the new refinance.
Example: Multiple refinance scenario
You paid $4,000 in points on a 2022 refinance and have been deducting $133/year. In 2026, you refinance again and pay $5,000 in new points:
This strategy can create substantial deductions in refinance years while maintaining ongoing annual deductions.
Tracking multiple point deductions
Keep detailed records of all points paid and track the annual amortization. Many taxpayers lose track after the first refinance and miss claiming the accelerated deduction.
Key takeaway: Frequent refinancers can claim large point deductions by accelerating previous loans' remaining points while starting fresh amortization schedules.
Key Takeaway: Multiple refinances create opportunities for large point deductions by making previous loans' remaining points fully deductible in the refinance year.
Robert Kim, CPA
Best for homeowners doing cash-out refinances for home improvements or other purposes
Cash-out refinance point deduction rules
Cash-out refinances create more complex point deduction scenarios. The IRS requires you to allocate points between the portion used to refinance existing debt (spread over loan life) and the portion used for home improvements (potentially fully deductible).
Example: $400,000 cash-out refinance breakdown
Original mortgage balance: $250,000
Cash out: $150,000 (for kitchen renovation)
Total new loan: $400,000
Points paid: $8,000 (2 points)
Point allocation:
This creates a much larger first-year deduction compared to a straight refinance, potentially saving $760-1,013 in taxes depending on your bracket.
Documentation requirements
Keep receipts proving the cash was used for home improvements. Without proper documentation, the IRS may require spreading all points over the loan term.
Key takeaway: Cash-out refinances for home improvements allow partial immediate point deductions, potentially creating $3,000+ in first-year deductions versus $167 for straight refinancing.
Key Takeaway: Cash-out refinances for home improvements can generate much larger first-year point deductions by allowing immediate deduction of the improvement portion.
Sources
- IRS Publication 936 — Home Mortgage Interest Deduction
- IRS Topic 504 — Home Mortgage Points
Related Questions
Reviewed by Robert Kim, CPA on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.