On March 31, year 1, Mary borrowed $200,000 to buy her principal residence. Mary paid3 points to reduce her interest rate from 6 percent to 5 percent. The loan is for a 30-year period. What is Mary's year 1 deduction for her points paid?

Question

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Points paid on a mortgage for a principal residence are generally deductible in the year paid if they are paid in connection with the purchase of the home. Mary paid 3 points on a $200,000 loan, which is $6,000 (3% of $200,000). Therefore, the entire $6,000 is deductible in year 1.

On March 31, Year 1, Mary Borrowed $200,000 to Buy