Yes, you can deduct points for your main home, if all of the following conditions apply:
- They're discount points (see the definition)
- The mortgage is used to buy, build, or improve the home, and the home is the collateral for the loan
- Paying mortgage points is a customary practice in your area and the points you paid aren't excessive for your neighborhood
- The points were paid directly to the lender, either by you or the seller (no borrowing)
- Your down payment, plus any points the seller paid, exceed the points paid amount
- You use the cash method of accounting (almost all taxpayers do)
- The points are calculated as a percentage of the mortgage principal (not required on home-improvement loans)
- The points are clearly itemized on your settlement statement as points (not required on home-improvement loans)
If you meet all the above criteria, you can either deduct all your points in the year you paid them or deduct them in equal increments over the life of the loan. Either way, you'll need to itemize to get the deduction.
The deduction for mortgage interest is capped at $750,000 of debt. Interest on up to $1 million of acquisition debt for loans prior to December 15, 2017 is grandfathered.
On a second home, points can only be deducted over the life of the loan. The same is true for refinances, except in cases where you used a portion of your refinance proceeds to improve your home. In that case, the points related to the home-improvement portion of the loan can be deducted in the year you paid them.
If you refinanced with the same lender, any undeducted points left over from the first mortgage will be deducted over the life of your new loan. But if you refinanced with a new lender, any leftover undeducted points can be deducted in the year of the refinance.
When you get to the Did you have any home loans? screen in the Deductions Credits section, we'll walk you step-by-step through your mortgage, including points and refinances.
On rental property, yes. Points are deductible as a depreciation expense over the life of the loan. More info.