Refinancing Your Home Mortgage

If you refinanced, or are considering refinancing, your home mortgage this year, you may be able to deduct some of the refinancing expenses on your 2007 tax return.

Points

So-called "points" may be deductible as mortgage interest. Points paid to obtain an original mortgage on the acquisition of your personal residence are fully deductible in the year paid. Points incurred to refinance a home mortgage must be amortized over the life of the mortgage. If you used the loan proceeds to pay for improvements on your residence, and if you meet certain other requirements, the points incurred will be fully deductible in the year paid. If you are refinancing the mortgage on your personal residence for a second time, the unamortized portion of the points paid on the first refinancing will be fully deductible.

IRS Definition of Points

Points, in order to qualify as deducible interest, must be considered compensation to the lender solely for the use or forbearance of money. Points cannot be a form of service charge or payment for specific services. They must be calculated as a percentage of the loan amount, paid by you directly, and may not be derived from loan proceeds.

Related Expenses

Other related expenses, such as appraisal fees, notary fees, note preparation costs, etc., cannot be deducted.

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