I have refinanced a mortgage and paid for quite a lot of points. The refinance was zero-cost, so the points came from the increased loan amount. I used the money I saved due to zero-cost refinance to make home improvements (install central AC).
However, I used the money not in the same calendar/tax year. The refinance process has ended close to the end of the year, so I only paid for the home improvements the next year.
Can I deduct all the points at once without amortizing? (Deduct for the year when I refinanced.)
IRS docs are vague here, because they never say that the money need to be spent the same year. Does this mean that I can deduct all points no matter when I do the actual home improvements?
However, if part of the refinanced mortgage money was used to finance improvements to the home and if the taxpayer meets certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid.
If you purchased your home in 2021 or refinanced it to make improvements, we'll deduct all of your points on your current tax return rather than amortize them over the life of the loan.
Update: Put another way:
Imagine, I refinanced a mortgage loan in 2016 paying $8k (or $12k) points and cashing-out $15k. Then in 2018 I [will] use $10k to install AC. Which amount can I deduct for tax year 2016 and/or for tax year 2018? $0? $8k? $10k? $12k?