Are mortgage points deducted or amortized?

It depends on the purpose of the loan and how the points are used. For tax year 2025, mortgage points may be deducted in the year paid or amortized over the life of the loan, depending on the facts below.

Points on a loan to buy or build your main home

You may generally deduct points in full in the year paid if all of the following are true:

• The loan is used to buy or build your main home
• Paying points is a common practice in your area
• The points aren’t more than what’s generally charged
• You use the cash method of accounting
• The points are clearly shown on the settlement statement (e.g., Form HUD-1 or Closing Disclosure)
• You paid the points from your own funds (not from the lender)

If these conditions are met, the points are treated as prepaid interest deductible on Schedule A (Form 1040) in the year you paid them.

Points on a refinance

For a refinanced mortgage, points are not deducted all at once. Instead, they are generally amortized (deducted ratably) over the life of the loan.

Example:
If you pay $3,000 in points on a 30-year refinance, you generally deduct $100 per year.

Special refinance rules

• If part of the refinance proceeds is used for home improvements, the portion of points allocable to the improvement amount may be deducted immediately.
• If you pay off or refinance again before the loan ends, you can usually deduct any remaining unamortized points in that payoff year.

Points on a loan to buy or improve a second home

• Points may be deductible, but immediate deduction is not automatic.
• In many cases, points on a second home are amortized unless they meet the same strict requirements as a main-home purchase.

Business or rental property points

If the loan relates to:

• Rental property, or
• Business-use property

Then points are capitalized and amortized over the life of the loan. They are not deducted on Schedule A.

Quick summary

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Sources:

IRS Publication 936, Home Mortgage Interest Deduction

IRS Publication 17, Your Federal Income Tax (2025)

Treasury Regulation § 1.461-1(a)(1)

Internal Revenue Code § 163(a) & § 163(h)

IRS Schedule A Instructions (Form 1040)

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