Are Mortgage Points Tax Deductible? Limits, Refinances, and Reporting

Yes, mortgage points are tax deductible, but only if you itemize, and the timing depends on the loan. Points paid to buy or build your main home come off your taxes in full the year you pay them, provided the loan and payment meet IRS conditions. Points on a refinance or a second home usually have to be spread across the life of the loan. And none of it helps unless your itemized deductions beat the standard deduction, which for 2026 is $32,200 for married couples filing jointly and $16,100 for single filers.

Full Deduction in the Year You Buy

IRS Publication 936 sets out the conditions for deducting the entire cost of points in the purchase year. The loan has to be secured by your main home and used to buy or build it. The points must be figured as a percentage of the loan principal, and the amount charged must be in line with what lenders in your area typically charge. They also have to be identified as points on the settlement statement, using a label such as “points,” “loan discount,” “discount points,” or “loan origination fees.”¹

The money for the points has to come from you, not from the loan itself. Your down payment, earnest money, and other funds brought to closing must be at least equal to the points charged.

One rule catches people off guard: points cannot stand in for other closing costs. If a settlement statement rolls appraisal fees, inspection fees, title charges, or attorney fees into the points line, the IRS will not treat those dollars as deductible interest. Every dollar labeled as points has to represent a genuine charge for the use of money.²

Home Improvement Loans

Points paid on a loan used to substantially improve your main home also qualify for a full deduction in the year paid. The tests are the same as for a purchase loan, except the money is going toward an improvement rather than a purchase. The IRS does not spell out what counts as “substantial,” but projects that increase the home’s value or extend its useful life, such as kitchen remodels and room additions, generally qualify. Routine maintenance and minor repairs do not.¹

Refinance Points

Points paid on a straight rate-and-term refinance cannot be deducted all at once. You divide the total points by the number of monthly payments over the full loan term and deduct that portion each year. On a 30-year refinance with $6,000 in points, that works out to $200 per year ($6,000 ÷ 360 months × 12 months).¹

Cash-Out Refinances

If part of the refinance pays for substantial home improvements, you can split the points. The share tied to the improvement proceeds is deductible in the year paid, assuming the improvement-loan tests are met. The rest, tied to the refinance balance, is amortized over the loan term.³

Paying Off or Refinancing Again

Unamortized points matter when the loan ends early. If you refinance with a different lender or pay the mortgage off, you can deduct the entire remaining balance of points in the year the old loan ends. If you refinance with the same lender, the unamortized balance rolls into the new loan and continues to be deducted over that new term. Refinancing with your existing bank without knowing this rule can stretch a deduction you could have taken all at once across another 15 or 30 years.¹

Seller-Paid Points

If the seller pays your points as part of the deal, the IRS treats them as paid by you. You can deduct them in the year of purchase, as long as the standard conditions for an immediate deduction are met.²

The trade-off is that you reduce your home’s cost basis by the amount of seller-paid points. If the seller pays $4,000 in points and you bought the home for $400,000, your basis drops to $396,000, which can increase your taxable gain when you sell.

The $750,000 Debt Cap

The deduction only applies to interest, and therefore points, on qualified residence debt up to $750,000, or $375,000 if married filing separately. The One Big Beautiful Bill Act made this limit, originally set by the Tax Cuts and Jobs Act, permanent starting in 2026. If your mortgage exceeds the cap, only the proportional share of points tied to the qualifying portion of the debt is deductible.¹

A grandfathering rule preserves the older ceiling for loans taken out before December 16, 2017. Those mortgages still qualify under the previous $1 million limit ($500,000 if married filing separately).¹

You Have to Itemize

Deducting points requires Schedule A, and Schedule A only helps if your itemized deductions exceed the standard deduction. For 2026, that standard deduction is $32,200 for married couples filing jointly, $24,150 for heads of household, and $16,100 for single filers or married individuals filing separately.⁴

A married couple filing jointly would need mortgage interest, points, state and local taxes (capped at $10,000), charitable contributions, and other qualifying expenses to add up to more than $32,200 before itemizing pays off. In high-cost housing markets with large loans, that threshold is often cleared. In lower-cost areas with smaller mortgages, paying points for the tax benefit alone often does not work out. Run the numbers before assuming a tax savings.

Reporting Points on Your Return

Your lender reports points paid on a home purchase in Box 6 of Form 1098, labeled “Points Paid on Purchase of Principal Residence.” Regular mortgage interest is in Box 1. The form should arrive by the end of January following the tax year.⁵

Deductible points go on Schedule A of Form 1040. Points reported on Form 1098 go on one line; points not on Form 1098, common with refinances where lenders often leave Box 6 blank, go on a separate line for points not reported to you on Form 1098.⁶

Keep your Closing Disclosure, the Form 1098 from your lender, and records showing where the closing funds came from. If you are amortizing points on a refinance, track the unamortized balance yourself year to year. A basic spreadsheet with the total points, the annual deduction, cumulative deductions taken, and the remaining balance will save time each April and give you documentation if the IRS asks.

1
Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction
2
Internal Revenue Service. Topic No. 504, Home Mortgage Points
3
Internal Revenue Service. IRS Tax Tip 2003-32, Refinancing Your Home
4
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
5
Internal Revenue Service. Instructions for Form 1098
6
Internal Revenue Service. Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses)