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Today members of the Maryland Association of Certified Public Accountants begin answering reader tax questions. The Baltimore Sun will publish answers through April 15.

Q: When you refinance your home mortgage, are the points you pay tax deductible as in the standard mortgage when you first buy the house?

A: Unlike points paid in connection with obtaining a mortgage for the purchase of a residence (which are generally fully deductible in the year paid), the deduction for points paid in connection with refinancing must be prorated over the period of the new mortgage.

As an example, assume that on Jan. 1, 1993, a taxpayer refinanced by obtaining a $100,000 mortgage payable over 10 years for which he was charged 2 points ($2,000). The allowable deduction for 1993 would be $200, computed as follows:

Points Paid $2,000

Total months in repayment period (12 months x 10 years) 120

Months in 1993 12

Ratio of months in 1993 to total (120/12) 10%

Amount deductible in 1993 (10% of $2,000) $200

If the mortgage is not prepaid or extended, the amount of points deductible for each of the years 1994 through 2002 will also be $200.

The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary. Consult with a tax adviser for specific advice.

Readers may submit questions by phone, mail or fax. Selected questions will be answered in The Sun and The Evening Sun.

To ask a tax question by phone, call Sundial, The Sun's telephone information service, at (410) 783-1800. In Anne Arundel County call 268-7736, in Harford County 836-5028, and in Carroll County 848-0338. Using a touch-tone phone, enter 6120 after you hear the greeting.

Written queries may be sent to TAX QUESTIONS, The Baltimore Sun, Business News Department, 501 N. Calvert St., Baltimore 21278. Fax questions to The Sun's Business News Department at (410) 783-2517. Callers are encouraged, but not required, to leave their names and phone numbers should questions need to be clarified. Questions will not be answered by phone. Names and numbers will not be published.

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