Patti (whipartist) wrote,

Weird mortgage tax question

So when you refinance a mortgage, any points that you pay are tax-deductible on an amortized basis over the life of the loan. For example, if you pay $3000 in points on a 30-year loan, you can deduct $100/year over the life of the loan. (This is a slightly simplified description, but it's close enough for this discussion.)

If you pay off the loan early, you can deduct the remaining points in the year you paid off the loan. If you deducted $500 in points over five years then refinanced again, you could deduct the remaining $2500 in points that year.

However, this does not hold true if you refinance the loan with the same lender. In that case, you just keep taking $100/year in deductions for the old loan for as long as you hold the new loan.


So the weird question: what happens if a bank got swallowed up by another bank? If I'm holding a WaMu loan and refinance it with Chase this year, do I get to accelerate the points from the old loan or do I have to keep amortizing them? For tax purposes, is the swallowing bank considered to be the same entity as the bank that it ate?

I know, I should call the IRS and ask this one, but I'm curious to know if anyone has the answer.
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