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This guide is general information, not tax advice. Tax rules change — consult a qualified tax professional about your situation.
The short answer
Points paid on a refinance are generally not deductible in full the year you pay them. Under IRS guidance, you must deduct them ratably (evenly) over the life of the new loan — total points divided by the number of scheduled payments, deducting only for the payments you actually made that year. This is the opposite of points on a purchase mortgage, which can sometimes be deducted in full in the year paid if all the IRS conditions are met. The main exception: if part of your refinance proceeds went toward substantially improving your main home, the portion of points tied to that improvement may be deductible in the year paid.
Purchase points vs. refinance points: the two tracks
IRS Topic 504 draws a hard line between these two situations:
| Situation | Tax treatment (per IRS guidance) |
|---|---|
| Points on a mortgage to buy or build your main home | May be fully deductible in the year paid if you meet all 8 IRS conditions |
| Points on a refinance | Must be amortized ratably over the life of the loan |
| Points allocable to home-improvement refinance proceeds | May be deductible in the year paid (the portion tied to the improvement) |
| Points on a second home mortgage | Amortized over the life of the loan |
The 8 conditions for a year-one deduction on purchase points (IRS Topic 504): you itemize on Schedule A; the loan is to buy, build, or improve your principal residence; your principal residence secures the loan; paying points is an established practice in the area; the amount wasn't more than generally charged in the area; you provided funds at or before closing at least equal to the points (not borrowed from the lender); the points were computed as a percentage of the loan principal; and the amount is clearly shown as points on your settlement statement.
Note the refinance reality check: even if your new loan is secured by your main home, refinancing doesn't count as buying or building it — that's why the amortization rule applies.
The math: how to amortize refinance points
The IRS method from its published FAQ:
- Divide total points by the number of scheduled payments. On a 30-year loan with 360 monthly payments, $3,000 in points = $8.33 per payment.
- Deduct only for payments you actually made that year. In a year you made 12 payments: 12 × $8.33 = $100 deductible.
- Form 1098 won't do this for you on a refi. Points from a refinancing usually aren't reported in Box 6 of Form 1098. Enter them on Schedule A, line 8c ("Points not reported to you on Form 1098").
Worked example. You refinance into a $400,000, 30-year loan at 6.00% and pay 1 point ($4,000) to buy the rate down.
- Annual deduction: $4,000 ÷ 360 payments × 12 payments = $133.33 per full year
- Over 30 years, you'd deduct the full $4,000 — but only about $133 of it in the first year.
Compare that to the same $4,000 in points on a purchase mortgage where you meet all the IRS tests: the entire $4,000 could be deducted in year one. That difference is exactly why lenders who pitch refinance points as "tax deductible" without qualification are only telling you part of the story.
The home-improvement exception
If you refinance and use part of the new loan proceeds to substantially improve your main home, the portion of points allocable to the improvement amount may be deductible in the year paid — provided you meet the first 6 of the 8 tests above and paid with your own funds.
Example. You refinance a $200,000 balance into a $260,000 loan, using $60,000 for a kitchen remodel. You pay $2,600 in points. Roughly 23% ($60,000 ÷ $260,000) of the points — about $598 — may be deductible in the year paid. The remaining ~$2,002 gets amortized over the life of the loan.
Keep this documentation: contractor invoices, receipts, and a clear paper trail showing the improvement funds went to your main home (more on records in our HELOC interest deduction guide).
What happens when the loan ends early
- You pay off the loan or refinance with a different lender: the remaining unamortized points become deductible in that year.
- You refinance with the same lender: you cannot deduct the leftover points. Instead, you keep deducting them over the term of the new loan. The IRS treats a same-lender refinance as a continuation.
This matters if you're a serial refinancer: switching lenders when you refinance lets you write off the remaining balance of the old points, which can make rate-shopping a new lender slightly more attractive at tax time. Shop lenders here →
Points vs. origination fees: know what's actually deductible
Only charges that are genuinely prepaid interest can be treated as points. Amounts charged for specific lender services are not interest, and IRS Publication 936 explicitly lists items you cannot deduct as points in the year paid or over the loan's life:
- Appraisal fees
- Title search, title insurance, notary, and preparation costs
- Mortgage insurance premiums (see note below)
- Credit report fees
A "loan origination fee" is deductible only to the extent it is actually prepaid interest rather than a service charge. IRS guidance notes that designated loan origination fees on VA and FHA loans can qualify as deductible points if the standard requirements are met. Check the Loan Estimate's Section A (Origination Charges) and your Closing Disclosure: what the lender labels "points" versus "fees" matters, and a tax professional can help classify them.
On mortgage insurance premiums: the federal deduction for PMI/MIP expired after the 2021 tax year and has been extended retroactively by Congress in the past. As of October 2026, do not assume it is available — check current IRS guidance for the tax year in question.
Common mistakes
- Deducting all refinance points in year one. This is the single most common error. Refinances amortize; only purchase points (meeting all 8 tests) get the year-one treatment.
- Ignoring the year of payoff. If you sell or refinance with a different lender, don't forget to deduct the remaining unamortized points that year — it's easy to leave this money on the table.
- Assuming the Loan Estimate points are deductible points. The LE shows what you pay, not what's deductible. Service-fee origination charges and actual prepaid interest are taxed differently.
- Failing to track the amortization yourself. Form 1098 generally doesn't report refinance points, so if you don't keep your own schedule, you'll under-claim every year.
- Mixing up the improvement exception. Taking cash out for a vacation or debt consolidation? None of the points tied to that portion gets year-one treatment — only amounts used to buy, build, or substantially improve the home.
Methodology and limitations
Tax rules described reflect IRS Topic 504, IRS Publication 936, and related IRS FAQs as of October 2026. The worked examples are illustrative and use simplified assumptions (full 12-payment years, no partial periods). The home-improvement exception involves additional conditions and allocation rules — confirm the calculation with a tax professional. Congress periodically changes these rules; always verify the guidance for the tax year you're filing.
Reviewed by the LoanMate.ai editorial team.
Primary sources
- IRS Topic 504, Home Mortgage Points (irs.gov)
- IRS Publication 936, Home Mortgage Interest Deduction (irs.gov)
- IRS FAQ: Real estate (taxes, mortgage interest, points, other property expenses) (irs.gov)
Next action
Thinking about refinancing? Browse today's published mortgage rates →, then compare your Loan Estimates side by side → — and note the points each lender charges before you sign.