Mortgage Points Deduction Amortization 2027 Calculator
Calculate the 2027 federal tax deduction for mortgage discount points — immediate vs amortized over the life of the loan.
What Are Mortgage Points?
Discount points are upfront fees you pay at closing to lower your mortgage interest rate. One point = 1% of the loan amount and typically reduces the rate by 0.25%. For a $400K loan, 2 points = $8,000 upfront, lowering a 7% rate to ~6.5%. Points paid at origination are 'prepaid interest' — deductible on Schedule A (if itemizing). Source: IRC §461(g), IRS Pub. 936. Last updated: May 2026.
Immediate Deduction Rules (Purchase Loan)
Points on a primary-home PURCHASE loan can be deducted in FULL in the year paid IF: (1) loan is for buying or improving primary residence, (2) paying points is established business practice in your area, (3) points are calculated as a percentage of principal, (4) closing statement shows points clearly, (5) you paid them with your own funds (not seller-paid concessions). All five must be met.
Amortization Required (Refinance / Second Home)
For REFINANCE loans, second homes, and rental properties, points MUST be deducted ratably over the life of the loan. $8,000 on a 30-year refinance = $267/year ($8K ÷ 30) deductible for 30 years. If you sell or refinance again before 30 years, you can deduct the UNAMORTIZED balance in that year (catch-up deduction).
When Is It Worth Paying Points?
Compute the break-even: divide upfront points cost by monthly payment savings = months to recoup. If you plan to stay in the home/loan longer than break-even, paying points wins. Tax deduction further reduces effective break-even. For a $8K points cost saving $80/month (after tax @24% = $61/month), break-even = 131 months = 10.9 years. Stay >11 years → win.