How to take a tax deduction for a home refinance

How to take a tax deduction for a home refinance

During a historic low interest rate environment, everyone is talking about home refinance. If you are contemplating a refinance or completed one, here are few things you need to know.

If you are a homeowner, you know that you can deduct interest you pay on your mortgage as well as property taxes you pay. Do you know that you may be eligible to take a tax deduction for certain refinance cost?

When you purchase a home, points and loan origination fees you pay are fully deductible on Schedule A portion of your tax return for the year you paid those. However, when you refinance your loan, treatments of certain fees you pay are subject to a different set of rules.

Points you pay on a refinance loan are generally deducted over the life of the loan. Other closing costs you pay on a refinance are not eligible for a tax deduction. However, if you sell your home, the unclaimed portion of points are deductible of the year you sell your home.

Interest you pay on a home equity line up to $100,000 can also be deducted on your tax return. Consult a tax professional.