Question
If I must deduct points over the life of my mortgage, and I have a 30-year mortgage, should I divide the points paid by 30 and enter that amount on Schedule A?
Answer

No. While you must deduct the points over the life of the loan ratably (equally), you don't divide the points by 30 years. Instead, you divide the points by the number of payments scheduled over the term of the loan (360 monthly payments in the case of a 30-year mortgage) and deduct points each year according to the number of payments you made in that year (less than twelve payments in some cases).

  • If the loan ends prematurely, for example, because you paid it off or refinanced with a different lender, then the remaining points are deductible in that year.
  • Any deductible points not included on Form 1098 (usually not included on the Form when refinancing) should be entered on Schedule A (Form 1040), Itemized Deductions, line 8c "Points not reported to you on Form 1098."