Is there a limit to the number of times that I can claim refi points as a tax deduction?

[dts002]

In 2020 I refinanced the mortgage on my home and paid points.

I am now in the process of refinancing my mortgage again in 2021 since I am now able to obtain a much lower interest rate.

I plan to deduct the amount that I will be paying in points on my 2021 tax return & will also be deducting the amount that I paid in points when I amend my 2020 tax return.

Before I do this I need to be sure that I will be able to claim this points paid tax deduction in both my 2020 & 2021 tax returns based upon the amount that I paid in points both years.

Will I be able to claim this deduction for both years?

[Bsch4477]

There’s no limit to the number of times you can refinance.  If you refinance from the same lender you have to deduct the remaining points from the first mortgage over the life of the loan. You deduct the points of the new mortgage over the life of the loan regardless of whether it is a new lender. 

[dts002]

I know that there is no limit to the number of times that I can refinance what I'm wondering is if there is a  limit to the number of times that I can claim refi points as a tax deduction?

Am I allowed the claim this deduction on both my amended 2020 tax return & on my 2021 tax return?

[Bsch4477]

No limit to how many times you can deduct points. 

[dts002]

Where within the Turbo Tax online tax portal would I go to claim refi points as a tax deduction?

[Opus 17]

Remember that on a refinance, you must spread the points out over the life of the loan. In other words, for a 30 year mortgage, you can only deduct 1/360 of the points for each payment you made in 2021. You would then deduct 12/360 of the points you paid in 2022, and so on.  If you are currently spreading your points out on a previous loan, and you refinance with a different lender, you may then deduct the remaining points when you pay off that mortgage. If you refinance with the same lender, you must add the old points to the new points and start spreading them out over the new loan.

If you did not deduct points in on your 2020 return you want to file an amended return, you should do that first.  When you enter the 1098 for mortgage interest, TurboTax will ask you if this is a new or refinanced loan, if you paid points, and if you are spreading out the points. TurboTax should calculate the points for you, but you should verify the calculation by examining your schedule A before you file.  On your 2020 return, you will only claim a few dollars of points for the refinance in 2020. For example, if you refinanced in June and your first payment was August,  you could claim 5/360 of your points as a deduction.

then when you prepare your 2021 return, you will have two 1098‘s to enter, one for the previous loan that you paid off and one for the new loan.  TurboTax shit again asked you if you were paying points, if you were spreading out the points, and how much points were left over. If you refinanced with a new lender, you can deduct the remaining points from the old loan, plus a fraction of the points on the new loan.

[dts002]

And then for every subsequent year when I fill out my tax return, I'll be able to continue to deduct the points that I paid on my previous two mortgage refis?

[Opus 17]

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@dts002 wrote:

And then for every subsequent year when I fill out my tax return, I'll be able to continue to deduct the points that I paid on my previous two mortgage refis?

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I think the answer is yes but the question is worded a little oddly.

Suppose you refinanced in 2020 with bank A and paid $3000 in points, it was a 30 year loan, and you did not use the money for improvements.  We'll say you refinanced in June.  On your 2020 return, you would deduct $8.33 per month for each month that you made payments, added to the regular mortgage interest you paid. ($41.65).

Then in 2021, you refinanced with the same lender, and paid another $3000 in points.   We'll say June again.  You still deduct $8.33 per month for the months you were paying the old loan ($41.65).  Then starting with the refinance date, you roll up the remaining old points ($2916.70) plus the new points, and deduct that new amount ($5916.70) spread out over 360 payments ($16.44 per month). 

You can continue to deduct your points as additional mortgage interest for as long as you keep those loans, or until Congress changes the law (probably not but you never know). 

Hopefully, Turbotax will figure this out for you but I would not take it for granted.  I would verify the numbers and keep your own records.