Question

Nancy refinances her home mortgage on June 1 of the current year. She obtains a 30-year mortgage at 5%. As part of the refinancing, she pays points of $3,600 (a customary practice in her location). What amount, if any, of the points are deductible ____________?

Answer 1

Nancy will be able to deduct $70 points.

Step-by-step explanation:

the deduction is allowed in the year of payment if the following requirements are met:

- your main home is the security for your loan

- cash method of accounting is used

- points are not paid out of borrowed funds.

if Nancy does not fulfill the requirements, then the points will be allowed to be deducted over the life of the loan..

Therefore, $3600 will be spread over 30 years, Nancy will be able to deduct $70 points.