Mortgage Points Tax Deduction Calculator: Methods and Limits

To calculate the mortgage points tax deduction, start with the dollar amount of discount points on your Closing Disclosure and apply one of two methods. If you paid the points to buy, build, or substantially improve your main home and met the IRS eligibility tests, deduct the full amount in the year you paid it. If you paid the points on a refinance, divide that amount by the number of months in the new loan and deduct a monthly slice for each month the loan was in place during the year. The deduction only reduces your tax bill if you itemize on Schedule A, which for 2026 requires total itemized deductions above $16,100 for single filers or $32,200 for married couples filing jointly.¹

The Two Calculation Methods

For a qualifying home purchase, the math is direct. Whatever appears on page 2, Section A of your Closing Disclosure as “discount points” or “loan discount” is your deduction. One point on a $400,000 mortgage is $4,000, and the full $4,000 goes on your return for the closing year.²

For a refinance, you amortize. Take the total points paid, divide by the total months in the loan, then multiply by the number of months the loan was actually in place that tax year.³ A worked example: $3,600 in points on a new 30-year refinance divides to $10 per month ($3,600 ÷ 360). A full year yields $120. If the refinance closed in September, only September through December count, so the first-year deduction is $40. Each subsequent full year is $120 until the loan ends.

One important exception on refinances: if you used part of the proceeds to substantially improve your main home, the share of points tied to that improvement portion can be deducted in full the year you paid it. The rest still amortizes over the loan term.⁴

Eligibility for the Full Same-Year Deduction

To deduct purchase points all at once, every item on the IRS list has to hold. The loan must be secured by your main home and used to buy, build, or substantially improve it. You must have paid the points from your own funds at or before closing, not with money borrowed from the lender, and the cash you brought to the table (down payment, earnest money, escrow deposits) must be at least equal to the points charged.³

The points also have to be figured as a percentage of the loan amount, be clearly labeled on the settlement statement, and reflect the normal charging practice in your area at a rate that isn’t excessive for that market. They can’t be a stand-in for other closing costs like appraisal, title, or attorney fees.⁴

Miss any one of these, and you don’t lose the deduction. You just amortize it the same way you would on a refinance.

The $750,000 Debt Cap

For loans taken out after December 15, 2017, only interest on the first $750,000 of mortgage debt is deductible ($375,000 if married filing separately). The One, Big, Beautiful Bill Act made this cap permanent starting in 2026. If your loan is at or below that ceiling, ignore this step.⁵

Above it, prorate. On a $900,000 mortgage, multiply the points paid by $750,000 ÷ $900,000, or about 83%, to find the deductible portion. Loans originated on or before December 15, 2017 still carry the older $1,000,000 cap ($500,000 if filing separately), and that higher limit survives a refinance if the balance didn’t go up.⁵

What Happens When the Loan Ends Early

If you’ve been amortizing points and the loan ends before its term (sale, early payoff, foreclosure), deduct the entire remaining balance in the year the mortgage ends.³

Refinancing carries a catch. If you refinance with the same lender, you cannot deduct the leftover points from the old loan in a lump. You add them to the new loan’s points and amortize the combined total over the new term. Refinance with a different lender, and the remaining old-loan points come off that year in full.³

People commonly overlook this at sale or payoff. If you’ve been amortizing refinance points for a few years and then sell, your final-year deduction is the original total minus everything you’ve already claimed.

Seller-Paid Points

When the seller pays points for you, the IRS treats them as if you paid them yourself. If the eligibility tests are met, you deduct them in the purchase year just like out-of-pocket points.⁶

The trade-off: you must reduce your cost basis in the home by the amount of seller-paid points, which can enlarge the taxable gain when you eventually sell. The seller can’t deduct the points either; on their side, the amount reduces the gain from the sale.⁴

Discount Points vs. Origination Fees

Not every fee labeled “points” qualifies. The IRS separates true discount points (prepaid interest that buys down your rate) from origination fees, processing charges, or other lender costs that just happen to be quoted as a percentage of the loan. Preparation of loan documents, appraisals, inspections, title work, notary services, and attorney fees are not deductible as mortgage interest, even when the lender rolls them into a “points” line.⁴

The quick sanity check: if paying the fee lowered your interest rate, it’s likely a deductible discount point. If it didn’t move the rate, it’s an origination or processing fee and doesn’t belong on Schedule A. Your Closing Disclosure is required to tie points to a discounted rate, so page 2, Section A is where you confirm.²

Where the Deduction Goes on Your Return

Your lender sends Form 1098 each January. Box 6 reports points paid during a home purchase year. When points appear on the 1098, enter them on Schedule A, line 8a, alongside your reported mortgage interest.⁷

Refinance points usually don’t appear on the 1098. Enter the annual amortized amount on Schedule A, line 8c, which is designated for “points not reported to you on Form 1098.”⁸

If the 1098 figure disagrees with your records, use the amount that accurately reflects your eligible deduction. Seller-paid points, for example, may not appear on the 1098 at all.

Documents to Pull Before You Calculate

Closing Disclosure or settlement statement, showing the discount points paid, loan amount, and closing date.
Form 1098 for the tax year, with Box 6 for purchase-year points.
The loan term in months (typically 360 for a 30-year loan, 180 for a 15-year), needed only when amortizing refinance points.
Prior-year Schedule A filings if you’ve already been amortizing points from an earlier refinance.

Keep the Closing Disclosure with your tax records. The IRS lists loan agreements and settlement sheets among documents it may request during an audit, and the Closing Disclosure is the more detailed record if it disagrees with the 1098.⁹

Whether the Deduction Actually Helps You

The calculation only matters if you itemize. Add mortgage interest, points, state and local taxes (capped at $10,000), and charitable contributions. If the total beats $16,100 single or $32,200 married filing jointly for 2026, itemizing wins.¹ In a first purchase year with a full points deduction, clearing that bar is common. In later years, once points are already claimed and interest payments shrink, the standard deduction often pulls ahead. Run both totals before you file.

1
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill
2
Consumer Financial Protection Bureau. How Should I Use Lender Credits and Points (Also Called Discount Points)?
3
Internal Revenue Service. Publication 936 – Home Mortgage Interest Deduction
4
Internal Revenue Service. Topic No. 504, Home Mortgage Points
5
Office of the Law Revision Counsel. 26 USC 163 – Interest
6
Internal Revenue Service. Publication 530 – Tax Information for Homeowners
7
Internal Revenue Service. Instructions for Form 1098 – Mortgage Interest Statement – Section: Box 6 Points Paid on Purchase of Principal Residence
8
Internal Revenue Service. Real Estate (Taxes, Mortgage Interest, Points, Other Property Expenses)
9
Internal Revenue Service. IRS Audits – Records We Might Request