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?

IRS: https://www.irs.gov/pub/irs-news/at-03-32.pdf

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?

1 Answer 1


I looked at: Topic No. 504, Home Mortgage Points

Points are allowed to be deducted ratably over the life of the loan or in the year that they were paid. You can deduct the points in full in the year you pay them, if you meet all the following requirements:

  1. Your main home secures your loan (your main home is the one you live in most of the time).
  2. Paying points is an established business practice in the area where the loan was made.
  3. The points paid weren't more than the amount generally charged in that area.
  4. You use the cash method of accounting. This means you report income in the year you receive it and deduct expenses in the year you pay them.
  5. The points paid weren't for items that are usually listed separately on the settlement sheet such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes.
  6. The funds you provided at or before closing, including any points the seller paid, were at least as much as the points charged. You can't have borrowed the funds from your lender or mortgage broker in order to pay the points.
  7. You use your loan to buy or build your main home.
  8. The points were computed as a percentage of the principal amount of the mortgage, and
  9. The amount shows clearly as points on your settlement statement.

This list is for mortgages in general.

Now about home equity loans:

You may also be able to deduct (in the year paid) points paid on a loan to improve your main home if you refinance your home mortgage, and you meet tests one through six, above. However, if points are paid on a home equity loan created after December 15, 2017, to improve your home, even if you meet tests one through six, above, the points are not deductible for tax years 2018 through 2025. Even if the points are deductible, the amount of the deduction may be limited.

Since the new loan was made after 2017, it looks like you can't deduct the points at this time.

  • I'm not really sure about this. The sections of the full document does not seem to talk about 2017 (other than regarding the $750k limit). irs.gov/publications/p936 Anyways, my main general question about the year of home improvement still stands. 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 or year 2018? $0? $8k? $10k? $12k?
    – Ark-kun
    Jul 11, 2023 at 1:37

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