Are Mortgage Points Tax Deductible?

There are two types of mortgage points, discount mortgage points and origination mortgage points. No matter the type of point, one point is equal to one percent of the total home loan.   

Discount Mortgage Points

Discount points benefit the borrower and are tax deductible. According to the Internal Revenue Service, points are deductible in the year that they are purchased if certain regulations are met. Some of these requirements are listed below.

  • The loan that you take out is for your main residence.
  • The practice of paying points and the amount that you paid for the points are normal for your area of residence.
  • The points are used to decrease your interest rate, not to pay the broker or lender for services.
  • Your down payment before the points was at least as large as the payment for the points.
  • The amount is explicitly stated on your closing papers.   

If these requirements are not meant, then the discount points may still be tax-deductible over the full term of the loan.

Origination Mortgage Points

Origination points are used to pay the seller, lender, or broker for fees associated with processing, evaluating, and accepting the loan. Because they are not used to adjust the interest rate, they are not tax deductible.