Accounting Consultation

Free consultation

Our accounting firm offers a free initial consultation to small business owners in the Springfield area. Please call us at 217-544-2120 or complete this form and we will contact you shortly.

Contact Us

Send Us a File

Send your private, encrypted files directly to our CPA firm.

Send a File

Tax Center

Visit our Tax Center to sign up for tax due date emails, track your refund and more.

Learn More

Refinancing a Mortgage -- What Is Deductible?

« Back to Individual Tax

Many homeowners are looking at the historically low interest rates on home mortgages and are refinancing their mortgages before rates start creeping back up. If you recently refinanced your mortgage or are considering doing so, you'll want to understand the general tax rules for deducting the costs associated with refinancing.


Assuming you refinance debt that you incurred to buy, build, or substantially improve your main or second home, and that is secured by that home, interest on the refinanced debt is generally deductible. However, there are limitations on the amount of debt that can qualify for the interest deduction. First, it can't be more than the amount of the original debt that has been refinanced. Additionally, the debt can't exceed:

  • $1 million ($500,000 for married taxpayers filing separately), if the original mortgage that has been refinanced was taken after October 13, 1987, but before December 16, 2017; or
  • $750,000 ($375,000 for married taxpayers filing separately), if the original mortgage that has been refinanced was taken after December 15, 2017.

To deduct home mortgage interest, you must itemize deductions on your tax return. When you add up all of the individual deductions that you qualify for, they may or may not be more than the amount of the standard deduction for your filing status. If the total for the year is less than your standard deduction, then you will want to take the standard deduction.


Mortgage points, also known as discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. One point costs one percent of the mortgage amount (or $1,000 for every $100,000). Essentially, you pay some interest up front in exchange for a lower interest rate over the life of the loan.

Points paid for the refinancing of your home mortgage are generally deductible over the life of the loan. If it is the second time you have refinanced your mortgage, any portion of the points you paid on the first mortgage that haven't been deducted may be deductible in the year of the second refinancing.

Penalties and Fees

Generally, a prepayment fee paid on the old mortgage is considered a payment of interest on that mortgage and, therefore, is deductible in the year it is paid. However, other fees, such as those for credit reports, appraisals, and loan origination, are not deductible.

Before refinancing, talk with a financial or tax professional who can crunch the numbers for you and help you determine the most opportune option available to you.

Contact Our CPA Firm

2501 Chatham Road, Suite 120,
Springfield, IL 62704

Phone number: 217-544-2120
Email address:

Accounting Newsletter

We offer a free monthly newsletter featuring tax saving strategies, QuickBooks tips, ideas for growing your business and more.


Tax Tips

Five Ways to Prepare for Tax Filings

Organize records for tax return benefits Now that the page has turned on another calendar year, the tax return season is fast approaching.

• Read More