Most refinance closing costs are not tax deductible. The main exception is mortgage points, which count as prepaid interest and can be written off if you itemize, though on a refinance you generally have to spread the deduction across the full life of the new loan rather than claim it all in one year. A prepayment penalty from your old lender and private mortgage insurance premiums on the new loan can also be deductible. Appraisal, title, attorney, notary, credit report, and recording fees typically produce no tax benefit at all on a primary residence.
You Have to Itemize First
None of the interest-related deductions on a refinance do anything for you unless you file Schedule A instead of taking the standard deduction.1Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction For 2026, the standard deduction is $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Itemizing only pays off when your combined deductions, including mortgage interest, state and local taxes, and charitable giving, clear those numbers.
For a homeowner whose refinance lowered the rate, the yearly slice of amortized points can be small enough that the standard deduction still wins. Run the math each year before you count on any of this.
How Points Are Deducted on a Refinance
Points are the fee you pay a lender to buy down your interest rate. The IRS treats them as prepaid interest.3Internal Revenue Service. Topic No. 504, Home Mortgage Points On a refinance, you don’t deduct them all at once. You divide the total by the number of monthly payments in the new loan and take that share each month the loan is active during the tax year.1Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction
Say you paid $4,800 in points on a 20-year refinance that closed in October. Divide $4,800 by 240 months to get $20 a month. For the three months the loan was active that year, you deduct $60. Each full calendar year after, you deduct $240.
That slow drip surprises people who remember the rule for a home purchase, where points can sometimes be deducted in full the year you close. Standard rate-and-term refinances don’t get that treatment.
The Home Improvement Exception
There is one case where part of your refinance points can come off in year one. If you use some of the refinance proceeds to substantially improve your main home, the portion of points tied to that improvement share may be deductible in the year paid, if you meet the IRS tests for same-year deduction.4Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction – Section: Refinancing
The split is proportional. Refinance $100,000, put $25,000 into a kitchen remodel and $75,000 toward the old loan, and 25% of the points qualify for immediate deduction. The other 75% still gets amortized over the loan term.
Cash-Out Refinance Interest
When you pull cash out, what you spend it on decides whether the interest on that extra chunk is deductible. Interest on the cash-out portion is deductible only if the money buys, builds, or substantially improves the home securing the loan. Use it to pay off credit cards, take a trip, or cover other personal expenses, and that share of the interest isn’t deductible at all.5Internal Revenue Service. Real Estate Taxes, Mortgage Interest, Points, Other Property Expenses
The whole loan is secured by your home, but that isn’t what the IRS looks at. Only use of the proceeds matters. If $50,000 of your cash-out paid for a new roof and $30,000 consolidated debt, you have to track which slice of each month’s interest corresponds to each purpose. Only the improvement share counts.
Prepayment Penalties and PMI
Two costs on a refinance closing statement are easy to overlook.
If your old lender charged a prepayment penalty when you paid off the original mortgage, that penalty is deductible as mortgage interest in the year you paid it, so long as it isn’t a fee for a specific service tied to the loan.1Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction This one is a real same-year deduction, not amortized.
Private mortgage insurance premiums are deductible again starting with the 2026 tax year. After years of temporary extensions, Congress made the mortgage insurance premium deduction permanent. If your new loan requires PMI because you have less than 20% equity, those premiums go alongside your mortgage interest on Schedule A. The deduction covers premiums paid to private insurers and to government mortgage insurance agencies.
Old Points Left Over From a Prior Refinance
If the loan you’re paying off was itself a refinance, you probably have unamortized points still sitting on the books. Where those go depends on your lender.
- Different lender on the new loan: you can deduct the entire remaining balance of old unamortized points in the year the old loan is paid off.
- Same lender: no lump-sum deduction. You add the leftover points to any new points you paid, then amortize the combined total over the term of the new loan.
Both rules come from the IRS’s guidance on mortgages ending early.6Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction – Section: Mortgage Ending Early The same-lender trap is the one people miss. Refinance twice with the same bank and you may be carrying three layers of amortized points at once. A running spreadsheet of each refinance’s remaining point balance is the only way to keep the deduction from slipping.
Closing Costs That Aren’t Deductible
Most fees on the closing statement do nothing for your taxes. Appraisal fees, title insurance, attorney fees, notary charges, credit report fees, and recording costs are settlement or loan-origination expenses, not interest. The IRS line is simple: if the fee isn’t a payment for the use of borrowed money, it isn’t deductible as interest.7Internal Revenue Service. Rental Expenses
They don’t add to your home’s cost basis either. Fees connected with getting a loan, including lender-required appraisals and refinancing fees, cannot be included in basis.8Internal Revenue Service. Publication 551, Basis of Assets These charges sit on the same Closing Disclosure as your deductible points, but they don’t share the tax treatment.
If the Property Is a Rental
The picture changes on a rental refinance. Points still get amortized over the loan term rather than deducted in year one.1Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction But the deduction goes on Schedule E as a business expense, so you don’t need to itemize to claim it.9Internal Revenue Service. About Schedule E (Form 1040), Supplemental Income and Loss
The bigger difference: the “non-deductible” closing costs on a personal refinance can be capitalized as costs of obtaining the loan on a rental and amortized over the loan’s term. They reduce rental income each year. Pay off the loan early or sell the property, and any unamortized balance can generally be deducted in that final year.
How to Calculate Your Yearly Points Deduction
You need two numbers: total points paid and the number of months in the loan term.
Find the points on your Closing Disclosure under “Origination Charges,” in the loan costs section at the top of the closing cost details.10Consumer Financial Protection Bureau. 12 CFR 1026.38 Content of Disclosures for Certain Mortgage Transactions (Closing Disclosure) You’re looking for discount points or a loan origination fee that’s a percentage of the loan amount. A flat administrative fee called “origination” isn’t automatically the same as deductible points; if the charge isn’t computed as a percentage of principal, check with your lender.
Divide the points by the months in the loan. A 30-year has 360 payments, a 15-year has 180. Multiply by however many months the new loan was active in the tax year. Close in July 2026, claim six months on the 2026 return.
Your lender will send Form 1098 the following year showing mortgage interest paid. On a refinance, points may not appear in Box 6, which is reserved for points on a principal residence purchase.11Internal Revenue Service. Instructions for Form 1098 A blank Box 6 doesn’t mean you have no deductible points. Cross-check the 1098 against the Closing Disclosure and use your own amortization figure.
Where to Report It
For a primary residence, the year’s share of amortized points goes on Schedule A in the mortgage interest section. Points not reported on Form 1098 go on line 8c of Schedule A.3Internal Revenue Service. Topic No. 504, Home Mortgage Points
For rentals, the deduction goes on Schedule E. If you’re starting amortization of loan costs this year, attach Form 4562 as well.12Internal Revenue Service. 2025 Instructions for Schedule E (Form 1040)
Hang on to the Closing Disclosure, Form 1098, and your amortization worksheet for at least three years after filing. Refinance again before the loan term ends and you’ll need that worksheet to figure out how many unamortized points are left, and whether they come off in a lump sum or keep getting spread out.