Are you itemizing deductions in your individual income tax return? Consider deducting home mortgage points. If you can deduct all of the interest on your mortgage, you may be able to deduct all of the points paid on the mortgage.If you cannot deduct all the interest on your mortgage then you cannot deduct all your home mortgage points. Consider checking Can I Deduct My Mortgage Related Expenses Interview on IRS website for deducting mortgage interest and points. You can deduct the points in full in the year you pay them, if you meet all the following requirements: You use the cash method of accounting. This means you report income in the year you receive it and deduct expenses in the year you pay them. You use your loan to buy or build your main home. Your main home secures your loan. Your Payment of points is an established business practice in your area. The points were computed as a percentage of the principal amount of the mortgage. The amount shows clearly as points on your settlement statement. Remember the points paid should not be more than the amount generally charged in your area. Also note that the points you paid should not be for items that are usually listed separately on the settlement sheet such as appraisal fees, inspection fees, title fees, attorney fees, or property taxes. The funds you provided at or before closing, including any points the seller paid, were at least as much as the points charged. Lastly note that you cannot have borrowed the funds from your lender or mortgage broker in order to pay the points. Remember, you can also fully deduct points paid on a loan to improve your main home if you meet the said requirements. If the points you paid do not meet the requirements consider deducting them over the life of the loan. But remember, you may be subject to a limit on some of your itemized deductions, including points. Consider checking instructions on Form 1040 for the limits of itemized deductions.
