What’s the Point?

Pre-paid interest, sometimes called “points”, is generally tax deductible when a person pays them in connection with buying, building or improving their principal residence. When points are paid on a refinance, they are not a current deduction but have to be taken pro-rata over the life of the mortgage.

For instance, if $3,000 in points were paid on refinancing a 30 year mortgage, deduction of $100 per year is allowed. When the loan is paid off or replaced by refinancing again or the home is sold and the mortgage paid off from the proceeds, the balance of any un-deducted points may be taken in that tax year.

Your tax professional needs to be made aware of any of these situations so that he can accurately reflect the deduction in your return. Currently, the most common situation is where homeowners may be refinancing their home for the second, third or even fourth time. If there are points that have not been completely deducted, they need to be treated in the year of refinancing.

For more information, see points in IRS Publication 936; there is a section on refinancing in this publication. For advice considering your specific situation, contact your tax professional.

Please note: I don’t handle rentals or property management. I work with buyers and sellers, and that’s where I can help you most.

Market notes

Stay close to the market, without the noise.

Every so often I send a short, practical note: what Twin Cities homes did, prep tips that are worth the money, and neighborhoods worth a look. Sign up and you’ll also get this guide as a PDF to keep.

First name
Email

I’m most interested in (optional)BuyingSellingJust watching the market

Area (optional)

Yes, send me occasional market notes from David Olson, Twin Cities Property Finder. I can unsubscribe anytime.

A few notes a season, never daily. Your email stays with me.

It looks like you’re already on the list. Thank you! If something didn’t come through, call or text me at 952-314-9446.

Thank you! You’re on the list.

I’m glad you’re here. Your PDF copy of this guide is ready below, and a quick confirmation is on its way to your inbox. Whenever you want to talk about your own home or a move, I’m a call or text away.

— David

Download this guide (PDF)