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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. |
