On March 31, 2014, Mary borrowed $200,000 to refinance the original mortgage on her principal residence. Mary paid 3 points to reduce her interest rate from 6 percent to 5 percent. The loan is for a 30-year period. How much can Mary deduct in 2014 for her points paid?

Question

Quizplus · Accepted Answer

When refinancing a mortgage, points paid must be amortized over the life of the loan. Mary paid $6,000 in points ($200,000 x 3%). Since the loan is for 30 years, she can deduct $200 per year ($6,000/30). For 2014, since the loan started on March 31, she can deduct 9 months' worth, which is $150 ($200 x 9/12).

On March 31, 2014, Mary Borrowed $200,000 to Refinance the Original