Carlyle purchases a new personal residence for $230,000. He makes a down payment of $30,000 and finances the balance at a very favorable interest rate. To obtain the favorable rate, points equal to 3% of the loan balance are paid at the closing. What amount of the points can Carlyle deduct in the current year?

Question

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Carlyle can deduct the full amount of points paid on a mortgage for a personal residence in the year they are paid. The loan balance is $200,000 ($230,000 - $30,000), and 3% of $200,000 is $6,000.

Carlyle Purchases a New Personal Residence for $230,000