Your
Personal Income Taxes
With
a lower interest rate on your home loan, you will
have less interest to deduct on your income tax return.
That, of course, may increase your tax payments and
decrease the total savings you might obtain from a
new, lower-interest mortgage.
You
should be aware of an Internal Revenue Service (IRS)
ruling with respect to points paid solely for refinancing
your home mortgage. IRS regulations require that interest
(points) paid up front for refinancing must be deducted
over the life of the loan, not in the year you refinance,
unless the loan is for home improvements. This means
that if you paid a certain number of points, you would
have to spread the tax deduction for those points
over the life of the loan. If, however, the loan or
a portion of the loan is for home improvements, you
may be able to deduct the points or a portion of the
points. Check with the IRS regarding the current rulings
on refinancing, particularly if you are using the
new loan to make home improvements.
