Deducting Points On Home Refinances

Deduction of Refinance Points

Any points that you pay in the refinancing of your residence are tax deductible over the length of the loan in question. The deduction is allowable only if the residence is your primary home and the new mortgage replaces a previous one and/or is used to improve the residence. To the extent that money is taken out to pay off credit cards and non-residence costs, the points may not be used as a tax deduction.

Big Deductions By Refinancing Twice

If you refinanced your primary residence twice during 2004, you may be in for a very nice surprise. A significant tax deduction can be created when you refinance twice in one year. If you refinance a mortgage, you accelerate the deductible amount of points from the first mortgage and may claim the points from the first mortgage all at once.

As an example, assume that I refinanced my home in January 2004 and paid $3,000 in points. Interest rates continued to drop through 2004 and I then decided to refinance again in August. Because I paid off the original loan with the refinance, I am able to accelerate the value of the points of the January loan.

So, what tax deductions have I created for my 2004 filing period? Initially, I am going to deduct a percentage of the points off of my latest refinance. The deduction will amount to the total amount of points paid divided by the total months of the loan. This will not be a big deduction, but every little bit helps.

In addition to this amount, however, I will also deduct the full $3,000 in points that I paid on my January 2004 refinance! I am able to claim this deduction because I "accelerated" the deductibility of the points by paying of January mortgage with the August refinance.

By refinancing twice, I get a lower interest rate and a healthy tax deduction. Ah, the value of owning a home.

Richard Chapo is CEO of http://www.businesstaxrecovery.com - Obtaining tax refunds for small businesses by finding overlooked tax deductions and credits through a free tax return review.

---

The Annual Gift Tax Exclusion: Getting The Edge

Whether helping the kids with a down payment on their... Read More

E-commerce Taxation

The means and types of businesses have transformed with advent... Read More

Tax Audits: What Signs Make You More Likely to be Audited by the IRS?

It's a major fear for most Americans: A notice from... Read More

Furnishing Evidence in E-Tax Compliance

Self-assessment relies on taxpayers voluntarily meeting their tax obligations. This... Read More

How To Claim CHILD TAX CREDIT The Right Way And Add An Extra $2,000 To Your Refund

The U.S. Department of Agriculture estimates that it costs nearly... Read More

Tax Trap #3 -- IRS Penalties, Interest and Love Letters

As a small business owner or self-employed person, one of... Read More

Donating Cars To Charity - New Tax Rules

On June 3, 2005, the IRS released guidance on charitable... Read More

Tax Tips to Save Money on Taxes - Get the Corporate Kick and Save Loads of Money

Why a Corporation Helps Save You TaxesThe Tax Rates (Notice... Read More

How to Donate Your Car to Charity and Get Tax Deduction

Donating your used car to charity is a win-win situation;... Read More

Keeping Your Own Money ? NOT Handing It Over To The Taxman

Most people trying to make a crust online (or offline... Read More

Tax Reform, My Way

We need real tax reform and we need it now.... Read More

How to Reduce the Estate Tax Using the A-B Revocable Living Trust

In a past article I relayed the plight of the... Read More

IRS Lock-In Letters ? What?s An Employer To Do?

Employers often ask employees to designate the amount of tax... Read More

Truly Bizarre Taxes: The Tax on Illegal Drugs

One can never underestimate the enthusiasm that politicians have for... Read More

Employment Taxes ? Depositing With The IRS

If your business has employees, you must pay employment taxes.... Read More

Identity Theft ? Impacting Your Taxes?

If your identity is stolen, your finances can quickly become... Read More

Slash Tax when Buying a Business

When buying a business, how the "purchase price" is made... Read More

Complaince of Tax Return in Electronic Commerce Taxation

Emerging Legal issues of Tax compliance of e-business Self-assessment system... Read More

Alas! In E-Commerce Taxland

In trying to comply with tax laws for your e-business,... Read More

Surprising Truths About Tax Preparers

Choosing the right tax preparer for your business is a... Read More

Rental Property Tax Deductions

Own residential rental properties? This article discusses how income from... Read More

The Seven Deadly Tax Sins: Commonly Missed Deductions

It's that time again, the April 15 tax deadline is... Read More

Estate Taxes - It Pays to Plan Ahead

Estate taxes. It's not enough to simply know they exist,... Read More

How to Maximize Your Home Business Tax Deductions for 2005

Someone once said, 'the best way to calculate your taxes... Read More

What to Do If You Can?t Pay Your Taxes

The end of tax filing extensions is quickly approaching. What... Read More

What You Need To Know About Taxes If You?re Getting Married

It may not be high on the list of wedding... Read More

Reducing Taxes Through Dividend-Salary Mix Calculations

Should I take wages or dividends from my privately owned... Read More

Access to E-records by Taxing Authorities: A Case for Pakistan (Part I)

Background issues of access to recordsTo assess the records at... Read More

Need a Copy of Your Tax Return Information?

Taxpayers have two easy and convenient options for getting copies... Read More

Take Control of Your Taxes

As everyone in the U.S. knows, we have just passed... Read More

Six Urban Myths About Taxation

Six Urban Myths ? Taxation"I am proud to be paying... Read More

State Tax Information

All states also have their own tax system. Typically there... Read More

IRS Statute of Limitations: Do Taxes Ever Expire?

Many Americans believe that an IRS debt is a debt... Read More