Are mortgage points deductible?

What the IRS means by points

Publication 936 uses “points” for certain charges a borrower pays, or is treated as paying, to get a home mortgage. The same charge can show up under other names: loan origination fees, maximum loan charges, loan discount or discount points. The label on your paperwork matters less than what the charge is for. Only the part that is really prepaid interest can be deducted as points. A fee that pays for a specific service is not interest, whatever the closing statement calls it.

The publication lists examples of service charges that cannot be deducted as points, either in the year paid or over the loan: appraisal fees, Department of Veterans Affairs funding fees, mortgage insurance premiums, notary fees, and the cost of preparing the mortgage note or deed of trust. If a lender bundles one of these into a single “origination” line, ask for the breakdown before you copy a number onto your return.

The default: deduct ratably over the life of the loan

The general rule is blunt. You generally cannot deduct the full amount of points in the year you pay them, because they are prepaid interest and prepaid interest belongs to the years it covers. The publication lets you deduct points equally over the loan term if you meet all of the following: you use the cash method of accounting (most individuals do), the loan is secured by a home (it does not have to be your main home), the loan period is not more than 30 years, loans longer than 10 years carry terms like other loans offered in your area, and either the original principal was $250,000 or less or the number of points is not more than 4 for a loan of 15 years or less, or 6 for a longer loan.

If the loan is a home equity loan, a line of credit or a credit card loan and the proceeds are not used to buy, build or substantially improve the home, the points are not deductible at all.

The exception: deduct everything in the year paid

You can fully deduct points in the year paid if you meet all nine tests the publication lists. The loan is secured by your main home, the home you ordinarily live in most of the time. Paying points is an established business practice where the loan was made. The points were not more than what is generally charged there. You use the cash method. The points were not paid in place of amounts normally stated separately on the settlement statement, such as appraisal, inspection, title or attorney fees, or property taxes. The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. The loan buys or builds your main home. The points were figured as a percentage of the loan principal. And the amount is clearly shown as points on the settlement statement.

Meeting all nine does not force you to take the full deduction. The publication says you can choose to deduct the points in full or over the life of the loan. A home improvement loan on your main home gets a shorter list: tests one through six are enough.

Worked example from the publication

The publication’s ratable example uses a cash-method taxpayer who took out a $100,000 loan in 2025 payable over 20 years on terms matching other 20-year loans in the area and paid $4,800 in points. With 240 monthly payments in the term and 3 payments made in 2025, the deduction is $60 ($4,800 divided by 240, times 3). In 2026, with all twelve payments made, it is $240 ($20 times 12). The calculator above runs that arithmetic for your numbers. It assumes the whole amount is prepaid interest and that you are on a ratable schedule; it does not test the nine conditions.

When you did not bring enough cash

If you meet every test except the funds test, the deduction in the year paid is limited to the funds you provided, plus any points the seller paid. The publication’s example: one point ($1,000) on a $100,000 mortgage and a $750 down payment as the only funds. You deduct $750 in the year paid and spread the remaining $250. If the seller also paid one point ($1,000), you deduct $1,750 in the year paid and still spread the $250. The funds can be a down payment, an escrow deposit, earnest money or any other money you paid at or before closing, but not money borrowed from the lender or mortgage broker.

If the points were more than are generally charged in your area, only the customary amount is deductible in the year paid and you spread the excess.

If the loan ends early

When you spread points and the mortgage ends early, whether through prepayment, refinancing, foreclosure or a similar event, you can deduct the remaining balance in the year it ends. There is one catch. If you refinance with the same lender, you cannot deduct the leftover; you carry it over the term of the new loan. The publication’s example: $3,000 of points on a 15-year loan from 2014 deducted at $200 a year, with $2,200 deducted through 2024. Paying the loan off in full in 2025 allows the remaining $800 that year.

Where the points go on your return

Form 1098 should generally include only the points you can fully deduct in the year paid. Points reported to you on Form 1098 go on Schedule A (Form 1040), line 8a with your other reported mortgage interest. Deductible points that were not reported to you go on line 8c. Because Form 1098 can show points you cannot deduct, particularly if you file married filing separately or have mortgages on several properties, check the amount against the tests above before you rely on it.

Your mortgage must also stay within the debt limits in Part II of the publication. Points on the part of a mortgage that exceeds the limit are not fully deductible. See the acquisition debt page for how the limit works.

Common mistakes

Treating a lender fee for a service as points. Taking a full deduction on a second home or a refinance, which the publication generally rules out. Forgetting that seller-paid points are treated as yours and also lower your home’s basis. And forgetting to itemize: none of this matters if your itemized deductions are below your standard deduction. Run the numbers with the whether itemizing beats the standard deduction first.

Related pages: refinance points, seller-paid points, and the mortgage points calculator for whether paying points saves money at all.

Sources

• IRS Publication 936, Home Mortgage Interest Deduction (2025): “Points”, “Deduction Allowed Ratably” and “Deduction Allowed in Year Paid”, plus the Reminders, Table 1 and Table 2. Read November 2, 2026.

Edition read: Publication 936 (2025), for use in preparing 2025 returns. Dollar limits in this publication are for 2025; the publication notes that tax legislation enacted July 4, 2025 (P.L. 119-21) may affect federal deductions, so check IRS.gov/Pub936 and the Schedule A instructions for your tax year. This page summarizes the publication and does not replace it. Marked for human review.