If you own a home with a mortgage, two of the most common tax deductions related to real estate are:

• Mortgage interest
• Points paid when you obtained your loan

When filing your taxes, understanding how these work can help you avoid missing a valuable deduction.

1. Mortgage Interest Deduction

The mortgage interest deduction allows homeowners to deduct interest paid on loans used to:

• Buy a home
• Build a home
• Substantially improve a home

The loan must be secured by your primary residence or a qualified second home.

The Internal Revenue Service explains this in detail in Publication 936 (Home Mortgage Interest Deduction):
👉 https://www.irs.gov/publications/p936

How Much Can You Deduct?

Under current rules, you can generally deduct interest on up to:

• $750,000 of qualified mortgage debt (if married filing jointly or single)
• $375,000 (if married filing separately)

If your loan originated before December 16, 2017, different limits may apply.

2. You Must Itemize

Just like the SALT deduction, mortgage interest only benefits you if you itemize deductions on Schedule A.

If you take the standard deduction, you don’t separately deduct mortgage interest.

Schedule A details:
👉 https://www.irs.gov/forms-pubs/about-schedule-a-form-1040

3. What Are “Points” on a Mortgage?

Points are fees paid to a lender at closing to:

• Lower your interest rate (discount points), or
• Cover certain loan costs

Typically, one point equals 1% of the loan amount.

Example:
If you borrowed $600,000 and paid 1 point, you paid $6,000.

4. Are Points Tax Deductible?

It depends.

If You Bought or Built Your Primary Residence:

You may be able to deduct points in full in the year you paid them, if certain IRS requirements are met.

If You Refinanced:

Points are usually deducted over the life of the loan, not all at once.

The IRS explains the rules in Publication 936:
👉 https://www.irs.gov/publications/p936

5. What About Rental Properties?

If the property is a rental or investment property, mortgage interest is generally deducted as a business expense on Schedule E, not Schedule A.

Points on rental properties are typically deducted over the life of the loan.

6. Form 1098: What You’ll Receive

Your lender will send you Form 1098 (Mortgage Interest Statement) showing:

• Total mortgage interest paid
• Points paid (if applicable)
• Outstanding loan balance
  
  

Keep this form with your tax documents.

Information about Form 1098:
👉 https://www.irs.gov/forms-pubs/about-form-1098

Key Takeaways

• Mortgage interest may be deductible on up to $750,000 of qualified debt.
• You must itemize to benefit.
• Points may be deductible immediately (for purchases) or over time (for refinances).
• Rental properties follow different rules.
  
  

Mortgage interest and points can represent significant tax savings — especially in the first few years of a loan when interest payments are highest.

If you're interested in knowing more or have some clarifying questions, please don't hesitate to reach out and ask, we're happy to help. 206-489-4920