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Points — Special Situations: Home Mortgage Interest Deductions (2025 IRS Guide)

This guide covers “Points — Special Situations” within home mortgage interest deductions. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 936 (2025), Home Mortgage Interest Deduction, published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points.

Points — Special Situations

This section describes certain special situations that may affect your deduction of points.

Original issue discount.

If you don't qualify to either deduct the points in the year paid or deduct them ratably over the life of the loan, or if you choose not to use either of these methods, the points reduce the issue price of the loan. This reduction results in original issue discount.

Amounts charged for services.

Amounts charged by the lender for specific services connected to the loan aren't interest. Examples of these charges are:

  • Appraisal fees,

  • Department of Veterans Affairs (VA) funding fees,

  • Mortgage insurance premiums,

  • Notary fees, and

  • Preparation costs for the mortgage note or deed of trust.


You can't deduct these amounts as points either in the year paid or over the life of the mortgage.

Points paid by the seller.

The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer.

Treatment by seller.

The seller can't deduct these fees as interest. But they are a selling expense that reduces the amount realized by the seller. See Pub. 523 for information on selling your home.

Treatment by buyer.

The buyer reduces the basis of the home by the amount of the seller-paid points and treats the points as if the buyer had paid them. If all the tests under Deduction Allowed in Year Paid, earlier, are met, the buyer can deduct the points in the year paid. If any of those tests aren't met, the buyer deducts the points over the life of the loan.

If you need information about the basis of your home, see Pub. 523 or Pub. 530.

Funds provided are less than points.

If you meet all the tests in Deduction Allowed in Year Paid, earlier, except that the funds you provided were less than the points charged to you (test 6, earlier), you can deduct the points in the year paid, up to the amount of funds you provided. In addition, you can deduct any points paid by the seller.

Example 1.

When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. Of the $1,000 charged for points, you can deduct $750 in the year paid. You spread the remaining $250 over the life of the mortgage.

Example 2.

The facts are the same as in Example 1, except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). You spread the remaining $250 over the life of the mortgage. You must reduce the basis of your home by the $1,000 paid by the seller.

Excess points.

If you meet all the tests in Deduction Allowed in Year Paid, earlier, except that the points paid were more than generally paid in your area (test 3), you deduct in the year paid only the points that are generally charged. You must spread any additional points over the life of the mortgage.

Mortgage ending early.

If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. However, if you refinance the mortgage with the same lender, you can't deduct any remaining balance of spread points. Instead, deduct the remaining balance over the term of the new loan.

A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event.

Example.

You paid $3,000 in points in 2014 that you had to spread out over the 15-year life of the mortgage. You deduct $200 points per year. Through 2024, you have deducted $2,200 of the points.

You prepaid your mortgage in full in 2025. You can deduct the remaining $800 of points in 2025.

Limits on deduction.

You can't fully deduct points paid on a mortgage that exceeds the limits discussed in Part II. See the Table 1 Instructions, later, for line 13.

Form 1098.

The mortgage interest statement you receive should show not only the total interest paid during the year, but also your mortgage insurance premiums and deductible points paid during the year. See Form 1098, Mortgage Interest Statement, later.

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.

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