It can be deducted also. Note that if you refinanced last year and paid points, the tax deduction is amortized over the life of the loan, not deducted in full the year you refinanced. Again, the amount you paid in points is listed on your escrow documents. When you sell the house, the basis value is subtracted from the final sale price to calculate how much profit you made on the house, assuming you made a profit. A new kitchen counts, but painting the kitchen won't,'' he said.
Many homeowners mistakenly think their home improvements are deductible.
The upgrades aren't deductible, but they do add to a home's basis value, so homeowners should keep receipts from all the work they have done to the house. Most homeowners know that in 1997 tax laws were changed to allow sellers to keep more of the profits from their home sales. But tax preparers say there is still enough confusion out there that the rules bear repeating. With few exceptions, sellers must have lived in their home for at least two of the past five years to qualify for these exclusions from taxation. The two years need not be consecutive.