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.
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