Don't forget your tax breaks 
when you refinance

With interest rates remaining at record lows for so long, it seems that just about everyone has refinanced their mortgage in recent years. Yet many people don’t maximize their tax break after a refinance, and others mistakenly think the rules are the same for a mortgage used to buy a home. 

Here's what you need to know to make sure you don’t forget to take your tax breaks when you refinance your home loan: 

How to deduct points: There’s a big difference between a mortgage used to purchase a home and one used to refinance a home. With a home purchase, you generally can deduct all the points in the year of your purchase. But with a refinance, you must take the deduction over the life of the loan in equal installments. 

For example, if you refinanced your current loan balance into a 30-year mortgage and paid $6,000 in points, you deduct $200 a year, each year, for 30 years. The best part: If you refinance in the future, you can take the full balance of your remaining tax deduction in the year you refinance out of your current loan. 

Mortgage interest deduction: 100% of your mortgage interest payments are tax deductible, for loans up to $1 million, and that’s still the case with your refinanced loan. 

All the rules can be found in IRS Publication 936 “Home Mortgage Interest Deduction.” Search Google for the latest edition.