While most expenses of buying a home are not deductible, there's a big exception when it comes to points paid to get a mortgage. Each point is 1% of the mortgage amount. So if you pay 2 points on a $200,000 mortgage, that's $4,000.
When the house you're buying is your principal residence, the entire expense is deductible in the year you pay it. And, get this: You get to deduct the points even if you persuade the seller to pay them for you.
There's a different rule for points paid when refinancing a home loan. But, still, closing the deal by year-end could pay off. Points paid on refinancing are deducted over the life of the loan. That means you deduct 1/30th of the cost each year on a 30-year mortgage, for example.
But, if you're among the millions of serial refinancers -- homeowners who have refinanced more than once as mortgage rates have fallen -- closing by December 31 could buy you a big write-off. When you refinance a loan that resulted from a previous refinancing, that ends the life of the first refinancing and means all as-yet-undeducted points can be written off at once. (One exception to this: If you refinance with the same lender who holds your current loan, undeducted points on the loan you're refinancing are deducted over the life of the new loan.)
Bottom line: If you're close to closing, check with the officials involved to see if you can speed things up to accelerate the tax benefit.
GETTING STARTED
