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Refinancing Your Home Mortgage

What’s deductible and what’s not?

While there are benefits to refinancing your home mortgage, most refinancing costs are not deductible on your tax return. There is one exception, however. The amount you pay for points, or prepaid interest, may be amortized over the life of your new loan. Although this might not amount to much when you spread it out over 15, 20, or 30 years, don’t file away your closing papers quite yet.

When the note is paid off, you may deduct the remaining interest attributed to the points you paid the first time you refinanced. However, according to the IRS, refinancing must be done at a different lender. In addition, the closing costs may reduce the taxable gain when you sell your home.