Question

Amortize Points refinance with same lender

Forum|Forum|3 years ago
February 20, 2023
1 reply
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I have a loan that was refinanced with a new lender in 2020, and $4000 worth of points were paid. I refinanced with the same lender in 2022 and $5000 in points were paid. How do I keep track of the $4000 worth of points that were amortized over 30 years in conjunction with the refinanced loan? My understanding is I can't deduct them all in Tax Year 2022 because it was a refinance with the same lender.

PatriciaV

Employee

While you generally may not deduct in full points for a refinance, if you use part of the proceeds to improve your main home and meet other tests, you can fully deduct the part of the points relating to the funds used for the improvement. See IRS Pub 936 under Deduction Allowed in Year Paid.

If you can't deduct the refinance points in the first year, enter the amount with the new mortgage and TurboTax will track the amortization of points on the Home Mortgage Interest Worksheet, Line 10c (one worksheet for each mortgage). Total points for the year are the sum of all amortization costs for all eligible mortgages, as shown on the Deductible Home Mortgage Worksheet, Line 25.

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G

GoneSailin74Author

The problem isn’t a lack of knowledge on my end, it’s that TT isn’t handling the deductions correctly.

D

DianeW777

If a mortgage loan is refinanced with the same lender, any remaining points must be added to the points on the new loan, then divided by the loan term to determine the monthly amount you can deduct. If there is a full year of mortgage payments then it would be 12 months deduction as points. For the first year it would be the number of months remaining in the year beginning with the first month payments begin and ending in December of that year.

You should add the points together that remain from the old loan with the points paid in 2022 for the same lender. When you reach the screen asking for information about the points enter the mortgage starting date and the total points paid (and remaining from loan one), include the term of the loan. This should provide the desired result once you complete this section for both 1098s.

Please update if you have more questions.

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