Part 1 Itemized Deductions and the QBI Deduction question: lower rate

Part 1Itemized Deductions and the QBI Deduction

Leo paid 2 points ($6,000) to refinance the mortgage on his main home in 2025 to get a lower rate. The loan has a 30-year term. How are the points treated?

A Deducted over the 30-year life of the loan
B Added to the basis of the home
C Not deductible at all
D Deducted in full in 2025

Show the answer and explanation

Answer: A. Deducted over the 30-year life of the loan

Points paid to buy or build a main home can usually be deducted in full in the year paid. Points paid to refinance are generally deducted ratably over the life of the loan ($200 a year here), unless part of the new loan is used to improve the home. Any undeducted balance is deducted when the loan ends, for example on another refinancing with a different lender. Source: IRC 461(g)(2); Pub. 936 (2025), Points. Tax year: 2025 (law as of 31 Dec 2025).

Common mistake

Deducting refinance points in full like purchase points.

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Original study material mapped to the public IRS SEE content outlines; not a real exam question.Not affiliated with or endorsed by the IRS or PSI. Verify figures and rules against current guidance before relying on them.