For homeowners wanting to refinance, the IRS usually requires that mortgage points, or prepaid interest, be amortized over the lifetime of the loan.
There's one exception, says Eric J. Wexler, a Rockville, Md., tax attorney and CPA.
If a portion of the refinanced mortgage proceeds is put toward home improvements, the points related to the home improvement amount may be deducted in the tax year of the refinance.
That is assuming the amount falls below the $100,000 deduction limit and that other IRS requirements have been met, Wexler says.
