The term points is used to describe certain charges paid to obtain a home mortgage. Points are prepaid interest and may be deductible as home mortgage interest. Generally, loan processing fees are not treated as prepaid interest and are not deductible. This is a fee for the services from the lender. However, lenders may treat origination fees as points. It depends on the lender.
Typically, points are reported in box 6 of the Form 1098 received from the lender.
The tax treatment of these points will depend on the loan. If such points paid on a mortgage were for the purchase or improvement of a personal residence, they may be deducted in the year they are paid. Points paid to refinance a home mortgage are not deductible when paid, but must be capitalized and the deduction spread over the life of the loan (amortized). Points charged for specific loan services, such as the lender's appraisal fee and other settlement fees, are not deductible.
Home Mortgage Points
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