What Mortgage Points Are and When They’re Deductible
Mortgage points, also called discount points or loan origination fees, are prepaid interest. According to IRS Topic No. 504, you can deduct them only if you itemize on Schedule A (Form 1040). Itemizing means listing your itemized deductions one by one instead of taking the standard deduction, a flat amount based on your filing status.
Some closing costs look like points but can’t be deducted as interest:
- Appraisal fees
- Notary fees
- Costs to prepare the mortgage note
- Mortgage insurance premiums (these aren’t points, though they may be deductible separately as mortgage interest beginning in 2026)
- Points charged in place of appraisal, inspection, title or attorney fees, or property taxes
Buying vs. Refinancing: How the Timing Differs
Generally, you deduct points ratably, meaning in equal shares over the loan term. Buying your main home is the main exception.
| Situation | When you deduct points |
|---|---|
| Buying or building your main home (all tests met) | In full in the year you pay them |
| Refinancing your main home | Over the life of the loan |
| Refinance money used to substantially improve your main home | That share in the year paid, the rest over the loan |
| Loan on a second home | Over the life of the loan |
Buying Your Main Home
You can deduct purchase points in full the year paid if you meet every test:
- The loan is to buy or build your main home, and that home secures it.
- Paying points is an established practice in your area, and you paid no more than is generally charged.
- You use the cash method, meaning you report income when you get it and deduct expenses when you pay them.
- You brought funds at or before closing at least equal to the points, and none of it was borrowed from your lender or broker.
- The points are a percentage of the loan principal and clearly shown as points on your settlement statement.
Seller-paid points count as paid by you if you subtract them from your home’s basis, its cost for tax purposes.
Refinancing Your Main Home
Refinance points generally can’t be deducted in full in the year you pay them, even when your main home secures the loan, according to IRS Publication 936. One exception applies. If you use part of the loan to substantially improve your main home, you can deduct the points tied to that part in the year paid, as long as you meet the tests and use your own funds.
For example, $3,000 in points on a 30-year refinance means deducting $100 a year.
Second Homes
You can deduct points on a second-home loan only over the life of the loan.
What Happens if Your Loan Ends Early
If your mortgage ends early through a payoff, refinance, sale or foreclosure, you can deduct the remaining points that year. In the illustration above, selling after 10 years would let you deduct the remaining $2,000 at once.
If you refinance with the same lender, though, you spread the remaining balance over the new loan’s term.
Limits and Forms to Check Before You Itemize
These rules also affect your claim:
- Points on debt above the limit aren’t fully deductible. The limit is $750,000 ($375,000 if married filing separately) for debt after Dec. 15, 2017.
- Older debt has a $1 million limit ($500,000 if married filing separately).
- Your lender reports deductible points on Form 1098. Refinance points usually aren’t reported there, so check your settlement statement.
Itemizing only helps if your total itemized deductions are higher than your standard deduction. The IRS 2026 inflation adjustments set these amounts for tax year 2026:
| Filing status | Standard deduction |
|---|---|
| Single or married filing separately | $16,100 |
| Married filing jointly | $32,200 |
| Head of household | $24,150 |
