Question by Surjit T: Are mortgage points deductible in the yr of pmt or do I spread them over life of loan?
I am a 1st time home buyer and am in a high tax bracket (33%). I am considering whether I should accept points and buy down the rate and claim all the points (approx $ 11,000) in the current year when I file my returns next year? This is not a refinance mortgage.
Answer by Casey J
You spread them over several years – usually three.
Know better? Leave your own answer in the comments!
On a purchase, the points are deductible in the year of the purchase. On a refinance, the points are deductible over the life of the loan.
Tom S has given you an exactly correct answer. Give him the 10 points!
do it claim it on the current yr..its very beneficial to you..you will have the mortgage interest and taxes to write off in the future..
Yes, you are allowed to deduct the points in full in the year you purchase your home. You can also amortize the points over the life of the loan, the choice is yours.
It may be smart to buy down the rate, but if you remain in the same tax bracket over the life of your loan, the additional interest payments you can deduct if you do not buy down the rate should also be considered. If you buy down the interest rate, you will have less interest to deduct in the future.
a quick web search came up with lots of results but this is the best one i could find for you.
Points are deductible in full on a new purchase and are generally amortized over the life of the loan on a refinance. If you use the funds from the refinance to improve the home, you can deduct them rather than amortizing them. Most often, people are simply refinancing for a lower rate or using the cash to payoff debt, etc. In that case, you must amortize.
On a new purchase, points are usually deductible in the year paid. There is a list of rules you must meet to deduct them in the year paid. On a refinance, you have to spread the deduction of the points out over the life of the loan.