Buying a home comes with significant expenses, but some of those costs could provide valuable tax savings. If you purchased a home in 2026 or are planning to buy before year-end, you may be eligible to deduct mortgage points on your federal income tax return.
Understanding how the mortgage points deduction works can help you maximize your tax benefits.
What Are Mortgage Points?
Mortgage points are upfront fees paid to a lender, typically to secure a lower interest rate. Each point generally equals 1% of the mortgage loan amount.
For example, two points on a $500,000 mortgage would equal $10,000.
The IRS considers qualifying mortgage points prepaid interest, which may be tax deductible if you itemize deductions rather than take the standard deduction.
When Can You Deduct Mortgage Points?
Depending on your circumstances, mortgage points may be deductible in the year paid or spread over the life of your loan.
Here are some important IRS guidelines:
- Primary residence: Points paid to purchase or build your main home may be fully deductible in the year paid if IRS requirements are met.
- Second homes: Points generally must be deducted over the life of the mortgage.
- Mortgage refinancing: Points are typically deducted over the loan term, although exceptions may apply for qualifying home improvements.
- Seller-paid points: Points paid by the seller may also qualify for a deduction, but they reduce the buyer’s tax basis in the home.
For mortgages obtained after December 15, 2017, the mortgage interest deduction generally applies to the first $750,000 of qualifying mortgage debt ($375,000 for married taxpayers filing separately). Certain older mortgages have higher limits.
How Much Could You Save?
Suppose you purchased a home in 2026 with a $500,000 mortgage and paid $10,000 in qualifying mortgage points.
If you meet the IRS requirements and itemize deductions, you may be able to deduct the entire $10,000 on your 2026 federal income tax return.
Your actual tax savings will depend on your income, tax bracket, and overall deductions.
Don’t Overlook Potential Homebuyer Tax Savings
Whether you’re purchasing your first home, refinancing, or buying a second property, understanding the mortgage points tax deduction could help you avoid missing valuable tax benefits.
Hare CPAs is here to help! Our team can review your mortgage documents, explain applicable IRS rules, and help identify deductions you may qualify for.
Contact Hare CPAs today to make the most of your 2026 tax planning opportunities.
