Are Mortgage Points Deductible the Year You Buy a Home?

TL;DR: Mortgage points on a home purchase can be fully deducted in the year you pay them if you meet six IRS tests from Publication 936, including that the loan is secured by your main home and the points are a customary charge in your area. If you don't meet the tests, or if you refinanced instead of purchased, you generally deduct the points gradually over the life of the loan. Either way, you must itemize on Schedule A to claim it, which only pays off if your total deductions beat the 2024 standard deduction of $14,600 (single) or $29,200 (married filing jointly).

_Last reviewed: August 2026 · 7 min read_

You paid $3,000 or $6,000 at closing to buy down your rate, and now you're wondering if that money comes back to you at tax time. It might, but only if your loan and your paperwork check specific boxes the IRS lays out.

Okoniq Property Hub keeps a record of your closing disclosure and mortgage statements in one place, so you have the documents ready when your accountant asks how many points you paid and when.

What are mortgage points and how do they show up on your closing statement?

A mortgage point equals 1% of your loan amount, paid upfront to lower your interest rate for the life of the loan. On a $400,000 mortgage, one point costs $4,000. Buying two points would cost $8,000 and might drop your rate by roughly 0.5%, though the exact tradeoff varies by lender.

Points show up on your Closing Disclosure, usually listed as "Loan Discount" or "Discount Points" in the loan costs section. This is different from origination fees, which cover the lender's cost of processing your loan and are treated differently for tax purposes. If you're unsure which line item is which, reading your mortgage statement and your Closing Disclosure side by side usually clears it up. For guidance on whether paying points makes financial sense at all, see mortgage points — when to pay for a lower rate.

Can you deduct mortgage points in the year you buy?

Yes, but only if you meet all six tests in IRS Publication 936. The loan must be secured by your main home, paying points must be an established business practice in your area, the points can't exceed the amount generally charged locally, you must use the cash method of accounting, the points can't be for services usually listed separately (like appraisal or title fees), and the funds you provided at closing (not borrowed from the lender) must be at least equal to the points charged.

If all six apply, you deduct the full amount in the year you closed, even if the seller paid the points on your behalf, which is common in negotiated deals. For example, if you paid $5,000 in points on a $350,000 loan closed in June 2024, that $5,000 is deductible on your 2024 return, assuming you itemize. If even one test fails, the IRS requires you to spread the deduction over the loan's term instead, the same way you'd handle points on a home equity loan used for something other than buying your main home.

What if you refinanced instead of buying — are points deductible the same way?

No. Points paid on a refinance are almost always deducted gradually over the life of the new loan, not all at once. The reasoning is that a refinance isn't "acquiring" the home, it's just replacing debt on a home you already own.

On a 30-year refinance, if you paid $6,000 in points, you'd deduct $200 a year ($6,000 ÷ 30). There's one exception: if you use part of the refinance proceeds to improve your main home, the portion of points tied to that improvement amount can be deducted immediately, and the rest amortized. This is one of several reasons it pays to run the math before refinancing, alongside a straightforward refinance break-even calculation to see if the points and closing costs pencil out at all.

| Scenario | Purchase Loan | Refinance | |---|---|---| | Deduction timing | Often fully deductible in year 1 | Amortized over loan term | | Key requirement | Six IRS tests must all be met | Points tied to home-improvement portion can be immediate | | Common amount | 1-2 points ($4,000-$8,000 on $400k) | Varies, same 1% per point rule | | Where to check | Closing Disclosure, Loan Discount line | Same, but on refinance CD |

Do you need to itemize to claim the mortgage points deduction?

Yes. Mortgage points are claimed on Schedule A as part of your itemized deductions, alongside mortgage interest, state and local taxes, and charitable gifts. If your total itemized deductions don't exceed the standard deduction, itemizing doesn't help you, and the points deduction effectively goes unused for that year.

For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. A homeowner with a $350,000 loan at 7% pays roughly $24,000 in interest in year one alone, which combined with points and property taxes often clears the itemizing threshold for married filers, especially in the first year or two of a new mortgage when interest paid is highest. This is worth checking against your amortization schedule, since your interest-to-principal ratio shifts every year and affects whether itemizing keeps making sense down the road.

What happens if you sell or refinance again before the points are fully deducted?

If you're amortizing points and you sell the home or refinance again before the term ends, you can deduct whatever portion of the points you haven't claimed yet in that final year. This applies to the original refinance points, not points from a brand-new purchase loan.

For example, if you refinanced with $9,000 in points on a 30-year loan and sold the home eight years later having deducted $2,400 so far, you'd claim the remaining $6,600 on your return for the year of the sale. Keep your original Closing Disclosure and any amortization tracking sheet, since you'll need the math to back up that final-year deduction if the IRS asks.

FAQ

Are mortgage points deductible if the seller pays them?

Yes. If the seller pays points on your behalf as part of the purchase negotiation, you can still deduct them in the year of purchase as long as the other five IRS tests are met, since the IRS treats seller-paid points as if you paid them yourself.

How do I know how many points I paid?

Check your Closing Disclosure for a line item labeled "Loan Discount" or "Discount Points," usually expressed both as a dollar amount and a percentage of the loan.

Can I deduct points on a rental property?

No, the full-year deduction only applies to your main home. Points on a rental property must be amortized over the life of the loan and deducted as a business expense on Schedule E instead of Schedule A.

Do points on an FHA or VA loan work the same way?

Yes, the same six IRS tests apply regardless of loan type, though FHA and VA loans sometimes bundle points with other closing costs, so check your FHA vs conventional breakdown or VA closing disclosure carefully to isolate the discount points line.

What if I only used part of my refinance for home improvement?

You deduct the fraction of points tied to that improvement amount immediately, and amortize the rest. For example, if 40% of a $300,000 refinance went to a kitchen remodel, 40% of the points paid can be deducted right away.

This is educational information, not tax advice. Talk to a CPA about how mortgage points apply to your specific return, especially if you refinanced, sold a home, or are unsure whether itemizing makes sense this year.