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Articles
and F.A.Q.'s
How
would refinancing affect the taxes you owe?
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 refinancing is for home improvements -- or a portion of the
loan is for this purpose -- you may be able to deduct the points
-- or a portion of the points -- under certain circumstances. Check
with the IRS regarding the current rulings on refinancing, particularly
if you are using the new loan to make home improvements.
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