The California Court Company said:
I am not a tax professional, but deducting points may not be worth it unless you can deduct the full amount in the tax year. According to my research, you can deduct the full amount for purchase or cash out loan such that the cash is used for home improvement, plus other criteria. Other wise the deduction will have to be spread out over the life of the loan.
On the other hand, you can deduct the remaining amount of points of the old mortgage in the year of refinance, because the old mortgage's life comes to an end.
here are the requirements to deduct points in full in the year of the loan
You can deduct the points in full in the year you pay them, if you meet all the following requirements:
1 - Your main home secures your loan (your main home is the one you live in most of the time).
2 - Paying points is an established business practice in your area.
3 - The points paid were not more than the amount generally charged in that area.
4 - You use the cash method of accounting. This means you report income in the year you receive it and deduct expenses in the year you pay them.
5 - The points paid were not for items that are usually listed separately on the settlement sheet such as appraisal fees, inspection fees, title fees, attorney fees, or property taxes.
6 - The funds you provided at or before closing, including any points the seller paid, were at least as much as the points charged. You cannot have borrowed the funds from your lender or mortgage broker in order to pay the points.
7 - You use your loan to buy or build your main home.
8 - The points were computed as a percentage of the principal amount of the mortgage, and
9 - The amount shows clearly as points on your settlement statement.
http://www.irs.gov/taxtopics/tc504.html