I had my home refinanced. What are some of the things that I can claim?

December 03, 2014 by Dave Du Val, EA
Yellow house with white fence

Hey Dave,

I just had my home refinanced to a lower interest rate and to a 15-year fixed mortgage. What are some of the things that are associated with refinancing that I can claim on my taxes?

Brendan

 

Brendan,

Unfortunately, not a lot. If you had to pay a pre-payment penalty on the old loan and the penalty was a percentage of the loan, you can deduct this penalty as interest. If you paid any points on the new loan (also known as loan origination charges, loan discounts, or basically any charge that is a percentage of the loan amount up to certain maximums), you may amortize the points over 180 months (the term of the new loan) and deduct the points as appropriate each year. If you borrowed additional amounts on the new loan and you will be improving your home with these funds, then the points attributable to the home improvements are immediately deductible on this year’s tax return. If this refinance was with a new lender and you had any amounts you were amortizing in connection with the old loan, the remaining unamortized amounts are also deductible on this year’s return.

Other costs are either added to your home's basis or are considered personal expenses, depending on what the expense was for and your use of the proceeds of the loan. It is likely that most, if not all, of the other expenses would be added to your home’s cost basis.

Our answer assumes that you refinanced for at least the remaining amount on your mortgage, and that it was not a principal reduction loan. Principal reduction loans may have other tax consequences.

Congratulations on your refinance.

Deductibly Yours,

Dave

 

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David E. Du Val, EA
Chief Compliance Officer for TRI Holdco

 

Dave Du Val, EA, is Chief Compliance Officer for TRI Holdco. Inc., the parent company of TaxAudit, and Centenal Tax Group. A nationally recognized speaker and educator, Dave is well known for his high energy and dynamic presentation style. He is a frequent and popular guest speaker for the California Society of Tax Consultants, the California Society of Enrolled Agents and the National Association of Tax Professionals. Dave frequently contributes tax tips and information to news publications, including US News and World Report, USA Today, and CPA Practice Advisor. Dave is an Enrolled Agent who has prepared thousands of returns during his career and has trained and mentored hundreds of tax professionals. He is a member of the National Association of Tax Professionals, the National Association of Enrolled Agents and the California Society of Enrolled Agents. Dave also holds a Master of Arts in Education and has been educating people since 1972. 


 

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